Merrill Lynch Offers Energy Themes to Watch in 2014

Energy stocks have underperformed this year, but Merrill Lynch analysts are reasonably positive on the sector for 2014, pointing to some key themes:

With the price of gas likely to remain in a narrow range next year, the firm says investors should buy high quality, large resource based stocks such as COG and RRC.

The net asset value race is over, and the coming year is about execution, Merrill Lynch says, seeing PXD and WLL as winners here.

Following 2013's wave of activism, the firm sees gains in HES and OXY.

Favorable outlooks for E&P budgets could lift oilfield services stocks focused on North America, such as HAL and SLB.

The Merrill Lynch team sees crude production rising to the highest level since 1989, and pinpoints TSO and VLO as the refiners to benefit the most in 2014 because they're "crude advantaged" and have stock specific catalysts for next year.

Finally, the firm suggests Investors with significant gains in CVX may want to take those and buy XOM for 2014.

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Citigroup Picks Winners and Losers Among U.S. Refiners

It may not be the gospel but we should pay attention as Citigroup picks winners and losers among U.S. refiners. Here is Citigroup's take on oil refiners. The firm expects to see a bottoming of earnings in Q4 for most names, but companies overweight the Midcontinent and/or Midwest could experience a difficult earnings environment through Q1 2014.

The diverging earnings performance will result in positive price appreciation for some refiners - such as Valero (VLO) and Tesoro (TSO), which earn upgrades to Buy - but underperformance for others, such as on Alon USA (ALDW), CVR Refining (CVRR), Holly Frontier (HFC) and PBF Energy (PBF), which will remain pressured by narrowing price differences between WTI and Brent crude.

TSO will benefit next year from a tighter gasoline market in California, and VLO will benefit from wider heavy light differentials in H2 2014 as increased Canadian heavy crude flows to the U.S. Gulf coast, Citi says.

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