Whenever a recovery begins in crude oil prices and natural gas, it always begins upstream, usually very far upstream. As I have noted before, this is signaled in the oilfield services (OFS) segment of the energy sector.
My tracking index for OFS companies currently follows 63 providers of early field development and preparation. These include everything from initial geological surveys, through seismic, analysis, test and exploratory wells, to pad preparation, drilling, well completion, maintenance, support, and workover rigs.
Before the improvement is recorded by the operators - the firms actually producing the oil and gas - we should expect a spike to take place in OFS. These are the providers who will experience a push before anything is extractable. Normally, indications of a recovery occur in OFS first.
It appears the recovery is happening again this time. All 63 stocks on my tracking list are up for the week (by an average of 4.5%) and 60 are up for the month (with an average rise of over 14% for all 63).
As we go forward, there's one strategy you should use to play this recovery...