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Will Crude Cross $50? 5 Energy Picks for October

Oil prices rallied on Tuesday after the latest short-term Energy Information Administration (EIA) outlook of 120,000 barrels per day drop in U.S. oil production from August to 9 million barrels in September. This is the lowest level since Sep 2014. The optimism was also echoed by the American Petroleum Institute (API) – the largest oil industry association in the U.S.

As a result, investors' hopes were rekindled on oil and the commodity, which showed some early signs of some reversal after losing almost half of its value year over year. And a lower number of domestic rigs revealed by Baker Hughes Inc. BHI for September lent further support to market optimism.

We feel the sinking rig count is a blessing in disguise for the beleaguered energy space. This is due to the simple fact that over the past decade the space has seen a mammoth rise in drilling and production related capacities. This resulted in an invariable rise in production levels. However, a falling rig count clears the path for stability, if not recovery, in prices.

Rebound in the Cards?

Russia’s willingness to meet major oil producers to discuss the present oil market scenario and a rally in U.S. gasoline pricing had a positive impact on global oil prices. Also, the Persian Gulf-based members of the Organization of the Petroleum Exporting Countries (OPEC) feel that the oil market is improving on higher demand for the commodity and a drop in supply growth from non-members.

Meanwhile, back home, a weak jobs report for the month of September raised speculations that the Federal Reserve may become more circumspect about raising rates this year. Lastly, the House of Representatives is widely expected to repeal the 40-year-old ban on exporting crude oil this week itself.

As a result, Tuesday witnessed the Energy Select Sector SPDR XLE gaining 2.2%. Big oil components ConocoPhillips COP rose 4.1%, Total SA TOT increased 3.6%, while both Chevron Corp. CVX and Royal Dutch Shell plc RDS.A advanced 3.5% each.

As an immediate outcome, the beleaguered West Texas...


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