NEW YORK (TheStreet) -- I was talking to Joe Deaux today about the very strong price of crude so far through 2014 and the beneficiaries of an oil price that will likely remain above $100 a barrel through the rest of the year.
Through much of the last half of 2013, many oil analysts thought that ramping production in the United States from oil shale plays in the Bakken, Eagle Ford and Permian basin plays would lead to an oil glut and a subsequent cratering of the price in 2014. So far this year, that hasn't happened.
I expect it's not going to. As I predicted last year, 2014 is going to see rising, high prices for crude oil, averaging well above $100 a barrel. Despite the increasing production here in the U.S., there is a profile of lower production from other traditional producing states in the Middle East and elsewhere which has contributed to global crude stockpiles being at their lowest levels since 2003.
That puts U.S. producers at a tremendous advantage to the rest of the world, able to take advantage of a rising barrel price while attempting ever increasing production targets. Energy has been a relative weak sector in the overall stock market, giving some terrific value to a few select U.S. exploration and production (E+P) companies.
Two favorites of mine in the Wolfcamp area of the Permian basin are Cimarex Energy (XEC) and Concho Resources (CXO), both reporting Wednesday. I expect both to miss on earnings (Cimarex is expected to earn $1.41 and Concho 96 cents), based upon bad West Texas storms in the last quarter, hindering production. But if both miss, that might allow for a temporary price adjustment, allowing an opportunity to buy both stocks. I would love to buy Cimarex around $104 and Concho around $110.
In addition to the Wolfcamp, another area to look at is the Bakken, with my favorite stocks being Continental (CLR) and Whiting (WLL) -- both of which will report on Feb. 26. Again, there is a good chance that estimates for earnings have been a bit overhyped and some misses can occur, delivering a nice opportunity to buy these shares as they come lower.
The long-term thesis is clear: Domestic oil producers will benefit from a continuing high price of crude oil where increasing production will be the key to higher valuations and stock prices. I talk more about this idea with Joe in the video above.
At the time of publication the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.