In a new report, Citi Research analyst Scott Gruber looked at oil services stocks and suggested a couple of pair trades for traders that want to protect against further downside in oil prices.

Gruber believes that the fundamentals of offshore drillers will likely not be improving anytime soon, but he does believe that certain companies are better positioned than others for an eventual recovery.

Waiting Game

Gruber believes that, for offshore drillers, recovery in business is not as simple as watching for a spike in oil prices. He believes that even if Brent prices reach $70/bbl, oil majors are unlikely to raise capex for the time being.

“The volume of idle rigs plus pending newbuilds should delay the call to reactivate mothballed rigs, thereby deferring a key catalyst to rate reflation,” he added.

Risk To Upside

Despite the bleak fundamental outlook for offshore drillers, Gruber sees…

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