Oil prices held above the $50 threshold as government figures continue to show large drawdowns, while investors bet on commitments by OPEC and non-OPEC players to slash production targets.

Encouraging Trends

OPEC Agreement:The Organization of Petroleum Exporting Countries (OPEC), whose member nations supply around 40% of the world's crude, said it would cut production by as much as 750,000 barrels a day starting in November in order to keep oil prices from falling further. Most industry observers didn’t have high expectations from the meeting.

OPEC's decision to cut oil production – made in a meeting in Algiers last Wednesday, Sep 28 – took most analysts by surprise. The move, led by Saudi Arabia, aims to trim output to 32.5-33.0 million barrels per day from the current 33.5 million barrels per day.

The group, which includes member countries from the Middle East, Africa and Latin America, also claims to have firm commitments from non-OPEC biggies like Russia to participate in a collective effort to cut the supply glut.

Bullish EIA Numbers:The U.S. Energy Department's inventory release showed that crude stockpiles declined for the fifth straight week, continuing to drag down the overall surplus.

The federal government’s EIA report revealed that crude inventories fell by 2.98 million barrels for the week ending Sep 30, 2016, following a decline of 1.88 million barrels in the previous week.

The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 2 million barrels. A drop in imports and production led to the surprise stockpile draw with the world's biggest oil consumer even as refinery activity slowed.

Following the fifth straight inventory reduction, the year-over-year storage surplus has narrowed down considerably.

Energy Stocks Gain

Year-to-date, ‘The Energy Select Sector SPDR’ has gained an impressive 17.54%, easily outperforming the broad-based Dow Jones Industrial Average and the S&P 500 index, which gained just 4.04% and 4.54%, respectively. Most major oil stocks – including mega-caps Exxon Mobil Corp. (XOM Quick QuoteXOM - Free Report) , Chevron Corp. (CVX Quick QuoteCVX - Free Report) and Royal Dutch Shell plc – relocated in the green with gains of 12.56%, 14.54% and 11.86%, respectively.

Upbeat Outlook

It's true that record high inventories and tepid demand growth could still push the commodity to the depths of multiyear lows. But signs are emerging that oil prices are likely to stabilize and gradually pick up. Not only is global demand expanding but energy companies have significantly scaled back on plans to explore for and bring out more oil. This should lead to lower future production and supply/demand rebalancing.

Secondly, while analysts remain deeply skeptical that the OPEC output curb would be carried through, the early reaction in energy stocks has been positive. Oil prices have jumped more than 10% since the members’ meeting in Algeria, and should the ministers agree on production levels in Nov, even higher prices are a likely outcome.

Even as we cannot run down the chances of the market moving sideways and seeing high volatility, many analysts are not too bearish about oil in the remainder of 2016. In fact, some industry observers are of the view that crude prices would break through $55-per-barrel before then year-end.

Opt for Value Picks with Earnings Growth

Since the long-term landscape holds well for energy stocks, despite certain bottlenecks, it will be a wise decision to invest in value stocks.

Value investing offers an opportunity to enter the market and grab stocks that have otherwise been overlooked by a majority of investors, and are thus trading at cheap multiples.

Thanks to our new style score system, we have been able to identify value stocks which have incredible potential in the near term. Our research shows that stocks with Value Style Scores of ‘A’ or ‘B’ when combined with Zacks Rank #1 (Strong Buy) or 2 (Buy) offer great investment opportunities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Further, we have chosen those value stocks that have an estimated growth rate of more than 20% this year.

4 Stocks to Invest In

CONE Midstream Partners L.P. : Headquartered in Canonsburg, PA, CONE Midstream Partners is a master limited partnership focused on natural gas and condensate gathering in the Marcellus Shale in Pennsylvania, Ohio and West Virginia.

Zacks Rank: #1

Value Score: ‘A’

Estimated growth rate for this year: 28.89%

Premier Oil plc : One of the oldest exploration and production companies in Europe, Premier Oil has assets spread over Africa, Brazil, Falkland Islands, Pakistan, Southeast Asia and the North Sea.

Zacks Rank: #2

Value Score: ‘A’

Estimated growth rate for this year: 110.63%

Antero Resources Corp. (AR Quick QuoteAR - Free Report) : Founded in 2002, Denver, CO-based Antero Resources is an independent oil and natural gas company with focus on liquids-rich natural gas in the Appalachian Basin in West Virginia, Ohio and Pennsylvania.

Zacks Rank: #2

Value Score: ‘B’

Estimated growth rate for this year: 42.54%

Tullow Oil plc (TUWOY Quick QuoteTUWOY - Free Report) : Headquartered in London, U.K., Tullow Oil is a European upstream player with main focus on Africa - Ghana, Uganda and Kenya. Additionally, the company holds licenses in the North Sea and South America.

Zacks Rank: #2

Value Score: ‘B’

Estimated growth rate for this year: 216.67%

Bottom Line

Despite the volatility in the energy markets, we suggest these top-ranked stocks – with a good value score and solid earnings growth forecast – as attractive bets for investors.

Zacks' Best Investment Ideas for Long-Term Profit

Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>