Oil Has Bottomed; Deutsche Bank Says Buy Energy

That old adage about picking bottoms on Wall Street does not apply for analysts at Deutsche Bank, who argued in a note Monday that oil has "likely bottomed" and it is "time to buy energy." The analysts said that oil fundamentals have turned, leading to a historic time to "begin buying energy for renewed outperformance."

Both sides of the market – supply and demand – are favorable. On the supply side, Deutsche Bank analysts said that supply in the U.S. has peaked or will peak in the next few months. While the Iran negotiations are "a wildcard," Deutsche Bank said it was skeptical that the country can quickly bring barrels to the market.

However, Deutsche Bank's analysis was not fully bullish. The analysts noted that though oil prices will rise from here, they will do so modestly. Additionally, consumer spending will not be supportive, remaining "muted" for the time being.

The analysts said they expect early cycle names to experience an "initial broad-based rally." However, that rally will be short-lived as an earnings recovery does not materialize. Instead, the analysts recommended the well service companies, including Basic Energy Services, Inc BAS and Key Energy Services, Inc. KEG. In addition, Superior Energy Services, Inc. SPN should move higher, Deutsche predicts.

The United States Oil Fund LP USO recently traded at $17.30, up nearly 1 percent on the session. The Energy Select Sector SPDR XLE was 1.3 percent higher to above $77.