Goldman Sees These 3 Areas Leading The Oil Market Recovery

Brent crude oil prices topped $50/bbl on Thursday for the first time in nearly seven months, providing further evidence that the oil market has found its bottom for this cycle. Now that the market appears to be stabilizing, investors are shifting their focus to which stocks will be the best performers throughout the recovery.

According to Goldman Sachs analyst Waqar Syed, the firm is targeting three areas: U.S. shale, Mideast OPEC and Brownfield development.

Syed believes Mideast OPEC producers have the advantage of running the industry’s lowest-cost operations. U.S. shale will be the global supplier of marginal non-OPEC oil. Finally, Brownfield oil typically falls low on the cost curve and could be an economical option for E&Ps looking to offset natural production declines.

Related Link: Citi Ups 2017 Oil Forecast To $65

A Few Stock Picks

For investors, Goldman names Schlumberger Limited. (NYSE: SLB), Halliburton Company (NYSE: HAL) and Nabors Industries Ltd. (NYSE: NBR) as top stock picks for the new era of oil.

“Around the world, E&Ps will likely strive to lower project costs through application of technology, enhanced collaboration with the service sector in the project design phase and by reducing the project scope,” Syed explained.

Goldman sees Schlumberger as the best option for companies looking to improve well economics.

Disclosure: The author is long HAL and SLB.