What to Expect From Energy in 2009

Energy was the hottest sector as oil skyrocketed to $147 a barrel in late July. However, a global recession has severely weakended demand and resulted in oil falling to almost $30 a barrel. Energy stocks have fallen in line with oil yet still offer some upside potential with restriced supply and the eventual strengthening of global economies.

Petroleum and natural gas producing companies offer no short term potential as commodity prices stabilized and find a bottom. However, we could only speculate that these prices will once again increase as OPEC tries to create a floor and economies eventually recover. Only the biggest companies should be bought here. I would recommend Exxon(XOM) as it tops its competitors in most if not every aspect and has been keeping its stock price steady. Conoco Philips(COP) is also a good bet as earnings estimates for this year have remained in line with last year's. Southwestern Energy(SWN) and XTO Energy(XTO) has been consistent performers in natural gas and offer some short term potential as we look for a colder than usual winter.

Oil equipment and services offer a little more potential. Once prices start to rise again, companies will once again be ordering more equipment and will be looking in alternative places to drill for oil. Transocean(RIG) is the world's largest offshore drilling contractor and has lots of free cash. Nabors(NBR) is the world's largest land drilling contractor and offers good long term potential.

Coal offers the most potential as lots of companies have been stocking up to hedge against increased demand and overall prices in the coming years. Coal is seen as a cheaper alternative that is easily transported through rail. Stock prices as a whole in this industry have fallen precipitously but Arch Coal(ACI) and Peabody energy(BTU) look like bright spots in recovery potential.

There are a few good companies that were not mentioned here. As always do your own homework and research before you just accept anyone's thoughts and ideas. Of course these companies might suffer if President-elect Obama has his ideas on green energy carried out. Until companies really start going green, energy industries offer good long term potential as prices eventually recover.