On Sunday, 13 members of the Organization of Petroleum Exporting Countries, or OPEC, and other countries will be meeting in Doha, Qatar, for discussions that could affect the fate of oil prices--and the stocks of struggling oil and gas producers in the U.S.
Saudi Arabia and Russia are said to have already agreed to cap their production at current rates (which is a little disingenuous for Russia, because it's already believed to be producing all it can) and others are expected to go along, including Venezuela, Iraq, Qatar, Kuwait and the United Arab Emirates.
Iran officials, however, have said they won't freeze or cut production until the country gets to its pre-sanctions level of 4 million barrels of oil per day. And Saudi officials have said they won't agree to an outright production cut if their northeast rival Iran won't do the same.
Jason Wangler, an analyst at brokerage and investment bank Wunderlich Securities, said he doesn't expect any type of cut, but rather a ceiling in production -- and therefore a potential floor in oil prices could emerge. He warns that with the upward move of oil prices recently on hopes for the talks (to above $40 per barrel, from under $30), a lack of a cut could be viewed as disappointing for both oil and oil stocks next week. Further, with first-quarter earnings season arriving, "We look for most companies and investors to focus on a brighter future than the ugly recent past."
Oil and gas consulting firm Wood Mackenzie said even if an output freeze is announced, it doesn't expect a "genuine" one to evolve for the rest of the year. And while Iran has been able to boost production by about 375,000 barrels of oil per day since sanctions were lifted in January, the firm doesn't expect the country to recover all of the 1 million barrels per day it lost before 2017.
Indeed, Mark Meyer, head of research at Tudor Pickering Holt, called Iran's progress at ramping up of production "anemic."
"Bottom line: A production freeze is optically good but the trend of improving U.S. inventories is more important and should be the market focus," wrote TPH, an investment bank headquartered in Houston, this week.
Blue skies are already being forecasted. The U.S. government expects U.S. shale oil production to fall for a seventh month in a row in May. And the International Energy Agency anticipates that world surplus will diminish to 200,000 barrels per day the latter half of this year.
Analysts at KLR said Friday that they expect this weekend's meeting to be a "non-event." And if there is a collective output freeze, they don't expect Iran to participate, instead gradually increasing production to 3.6 million barrels of oil per day by early next year.
Many believe positive expected results from the Doha meeting are already baked into oil stocks, so they're sticking by the strongest names in anticipation of whatever might happen Sunday.
Tudor Pickering Holt's core list includes majors like Chevron(CVX) - Get Report and Royal Dutch Shell (RDS.A) ; explorers and producers such as EOG Resources(EOG) - Get Report , Concho Resources (CXO) - Get Report, Cimarex Energy(XEC) - Get Report and Rice Energy (RICE) ; oilfield service companies such as Baker Hughes (BHI) , Halliburton(HAL) - Get Report and Schlumberger(SLB) - Get Report ; and midstream, or infrastructure, provider Kinder Morgan(KMI) - Get Report .
Among the higher-risk names, it likes Statoil ASA (STO) , Continental Resources(CLR) - Get Report , Range Resources(RRC) - Get Report , WPX Energy(WPX) - Get Report , Weatherford International(WFT) - Get Report , RPC(RES) - Get Report , Targa Resources(TRGP) - Get Report and Williams Partners(WMB) - Get Report .
"We're not looking to trade the meeting," said Jack Mohr, Research Director at Action Alerts PLUS. "For SLB, we believe that structural changes in the industry will be in the form of efficiencies, technological leadership, risk management and effective capital deployment."
He added that "Schlumberger fits the bill on all fronts, which is why we own it for the trust and view it as a long-term play on continued leadership, constant innovation, and ultimately value creation."
Given current valuations, Simmons, the energy-focused unit of Piper Jaffray, continues to recommend high-margin, low-cost quality operators with "palatable" balance sheets, including large-cap companies such as Apache(APA) - Get Report , Concho, EOG, Noble Energy(NBL) - Get Report and Pioneer Natural Resources(PXD) - Get Report , and smaller names such as Diamondback Energy(FANG) - Get Report , Newfield Exploration (NFX) , Parsley Energy(PE) - Get Report and Gulfport Energy(GPOR) - Get Report .