"The global supply picture is extremely bullish for crude oil," says energy expert Elliott Gue, who is playing this trend through oil services, equipment, and exploration firms including Schlumberger (NYSE: SLB), which he calls the "world's premier oil services play."
The editor of The Energy Strategist explains, "OPEC's current oil output isn't high enough to allow global oil importers to build their crude stocks ahead of the summer driving season. The fundamentals of strong growth in demand, coupled with static to falling supplies, are supporting higher global oil prices."
Further, he notes that unrest and weak output from Nigeria, terrorist attacks in Algeria and tension in the Middle East, and there are additional of reasons to be concerned that supplies could be cut even further from "current anemic levels."
All told, he sees, this as "a recipe for a significant rally in crude." In addition, he notes that global activity remains brisk, He notes, "We've seen no letup in the red-hot pace of international drilling and exploration activity; I expect no such slowdown to develop. In fact, if anything, the current environment should accelerate global oilfield activity."
Oil services -- he explains -- is a "catch-all term" used to describe a wide variety of oil production and exploration-related functions. He notes, "Suffice it to say that producers -- firms such as ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) -- need oil and gas services firms to find and produce hydrocarbons.
He notes that the industry is increasingly turning to more-complex methods of exploration, such as deepwater and Artic drilling. In this light, he says, ""roducers need the oil services firms more than ever. And Schlumberger has the most-advanced technologies in a slew of major services functions."
For example, he notes that Schlumberger's Q-Ship seismic vessels are the most advanced in the industry and are highly sought after by producers doing deepwater oil and gas field development.
He states, "Schlumberger also holds some unique, differentiated technologies in markets such as horizontal drilling and intelligent well design -- wells that can actually sense if they're producing too much water and shut down well segments accordingly.
The advisor notes that one of the longest-standing themes of his investment newsletter has been the end of "easy oil." He says, "Nw production will increasingly come from harder-to-produce reserves such as deepwater fields. New technologies also allow producers to maximize their production from mature fields."
And Schlumberger, he adds, is the perfect play on the "end-of-easy-oil scenario." He concludes, "The company's high-tech service offerings are exactly what the world's producers need to exploit these more-complex reserves. Schlumberger remains an excellent buy."
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.
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