Citi: Oil Could Fall 60% From Here

Now that winter has drawn to a close, analysts at Citi Research released a new report updating their outlook for the oil and gas exploration and production (E&P) sector.

Despite a brutal near-term forecast for oil and gas prices, analysts list several E&P names that they believe are well-positioned to capitalize on the eventual rebound in oil and gas prices.

Worst Yet To Come For Oil And Gas?

According to the report, this winter was about 6 percent colder than the ten-year average, and yet the cold winter failed to provide a boost to slumping natural gas prices. Now that cold-weather demand is no longer in play, analysts are lowering their projected natural gas prices based on increasing domestic production and falling coal prices.

Citi now projects an average 2015 gas price of $2.80/MMBtu, a 2016 price of $3.00/MMBtu and a multi-year long-term price of $3.75/MMBtu for 2018 and beyond.

Greater Than 60 Percent Downside?

Despite the fact that WTI crude oil prices have remained in the upper-$40 and lower-$50 price range throughout 2015, Citi analysts still believe that WTI prices will fall “well below $40/Bbl” and see downside risk as low as $20/Bbl in the short term.

A price of $20/Bbl would represent a more than 60 percent drop from current levels.

The United States Oil Fund ETF USO 2.11% is already down more than 51 percent over the past year.

Stock Outlook

Analysts see near-term downside risk of 15-20 percent for the E&P group.

However, they fully expect investors will be looking to buy the group at the bottom and see as much as 10 percent upside if crude oil prices stabilize over the next year.

Citi names the following E&P stocks with the most upside potential:

Read this article and all my other articles for free on Benzinga by clicking here

Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common SenseI don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!