Domestic Oil Stockpiles Surge To Record 13-year High

Energy is not really the place to be if youre a buyer in this stock market

. Oil prices and oil stocks are very vulnerable in the upcoming U.S. recession, and while there are some individual oil stocks that I do like right now, the group isnt going anywhere in this market. U.S. stockpiles of oil are growing fast, as domestic production is now at a 13-year high. Natural gas is plentiful, and demand is low, so the whole energy picture isnt looking good.

Combine very low to no economic growth, and youve got $90.00 or less World Texas Intermediate (WTI) oil. What were getting from the economic news and financial results this earnings season is a general, across-the-board slowdown in the U.S., Europe, and emerging markets. The only way oil prices and oil stocks can advance in an environment like this is if theres a new war. It doesnt mean peak oil doesnt exist, but low oil prices reveal economic stagnation in the worlds mature economies.

Consumers should benefit with lower oil prices and so should some specific industries. For example, if diesel prices go down and youre a railroad company, all of a sudden the cost to ship your freight is going down. Just like with gold stocks, oil stocks cant really advance when the underlying commodity isnt following suit.

As always, there are some growth stories out there. It doesnt mean Id buy them, but institutional investors might if the news is good enough. Kodiak Oil & Gas Corp. (NYSE/KOG) is a growth story in the energy sector. Its one of only several oil stocks that have generated excellent returns over the past three years.

Currently trading around $8.00 a share, this oil and gas producer has its operations concentrated in the Williston Basin of North Dakota and Montana, and the Green River Basin of Wyoming and Colorado.

In its second quarter of 2012, Kodiak reported average sales volumes of 12,696 barrels of oil equivalent per day (BOEPD). It is a growth story because this represents an increase of about 385% over sales volume of 2,618 BOEPD in the second quarter of 2011, and a 20% increase over first-quarter 2012 sales volume of 10,578 BOEPD. As I say, theres always a growth story out there in any industry, but I wouldnt be buying much in the energy sector with the economic picture thats being painted right now.

Spot oil prices are one of the best near-term gauges on global investor sentiment. Higher oil prices means things are looking up. Today, oil prices are saying that mature economies are in stagnation and emerging markets are slowing. I do like a few oil stocks in this market right now, but Im certainly not expecting a lot from them with oil prices in the tank.

by: Penny Stock Detectives

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