While OPEC is cutting back to alleviate price pressures, U.S. fracking companies could jump to capitalize on the windfall as crude oil prices jump back above $50 per barrel – according to some estimates, shale oil producers can get by with oil at just over $50 per barrel due to advancements in technology and drilling techniques that have helped cut down costs.
Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. The challenge for energy equities is that some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.
Mark Tepper, president of Strategic Wealth Partners, said in an interview with CNBC “that he just went overweight on energy names, even as the sector has fallen 17 percent on a year-to-date basis and the price of oil has tumbled 10 percent in that time,” while adding “his valuations measurement model is currently one standard deviation below its average level. Not only does that indicate energy stocks may now be inexpensive, but that specific level is typically seen before a bullish reversal.”
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