These dynamics haven’t stopped speculators from burning through billions of dollars. In fact, a Bloomberg analysis found that investors spent about $24 billion trying to call a bottom in the crude oil market during the latter part of 2015 alone. Much of this speculation is likely fueled by the dramatically oversold technical factors at play in the crude oil market or the potential for geopolitical conflicts in the region to create future supply issues.

Crude oil’s dramatic fall over the past year or so stems largely from supply-side dynamics that have been exacerbated by fears of a global slowdown.

Crude oil production in the United States has nearly doubled over the past six years, turning the world’s largest consumer into an increasingly self-sufficient country. OPEC has historically defended crude oil prices by reducing supply, but the cartel is worried that it would lose market share by doing so now. The new strategy appears to be starving U.S. shale producers that rely on higher oil prices, but U.S. oil production remained surprisingly robust throughout 2015.

The market has also been hit by concerns about China’s economic slowdown. With its gross domestic product slowing to less than 7%, the country may see a slowdown in its demand for crude oil. Emerging markets that were fueled by China’s insatiable appetite for commodities have experienced similar slowdowns amid the collapse in commodity prices. Many of these countries may similarly consume less energy as their economies suffer.

The higher U.S. dollar has been another factor influencing lower oil prices. In general, commodity prices are the inverse of the value of the dollar since most commodities are often priced in dollars. When the value of the dollar rises, fewer dollars are required to buy the same amount of commodities. The relationship may not be one-to-one, but there’s little doubt that commodity prices are inversely correlated to the dollar’s valuation.

The crude oil market may look bleak right now but there are some bullish tailwinds, which stem largely from the supply side of the market.

With crude oil prices headed below $30, there’s little doubt that domestic oil production is quickly becoming unsustainable. Nearly a third of corporate defaults in 2015 were energy companies under pressure from low oil prices, according to Standard & Poor’s. These bankruptcies could steadily reduce crude oil supply and create upward pressure on prices. Further, investment into future oil production is likely to be virtually nonexistent.

Many OPEC countries are struggling in a different way. While they have access to cheap oil, these countries rely on oil income to finance their budgets. The International Monetary Fund estimates that Saudi Arabia and its Persian Gulf allies will lose about $300 billion in 2016 due to low oil prices, which may be difficult to palette for very long. Cutting supply could help boost prices and potentially increase their crude oil revenue.

Investors may want to look at high-quality oil companies rather than the commodity itself when betting on a turnaround in the sector.

Many high-quality oil companies are well-positioned to weather the storm. With battered stock prices, investors have the opportunity to purchase these stocks at bargain levels if oil prices turn around over the coming years: Exxon Mobil Corporation (XOM) is trading with a 3.9% dividend and 15.9x P/E; Chevron Corporation (CVX) offers a 5.2% dividend at a 17.9x P/E; and Royal Dutch Shell (RDS) has a juicy 9.4% dividend.

The best companies in the space have little leverage and a low cost basis, while companies that should be avoided are those that are highly leveraged with a high cost basis. Whereas Exxon Mobil probably won’t go out of business, highly leveraged shale producers like Samson Oil & Gas Limited (NYSE MKT: SSN) have seen their stock prices crater. Investors should avoid these companies as their equity is likely to be eaten up by bondholders.

Crude oil prices are rapidly approaching $30 per barrel, but there are some signs that prices could turn around over the next couple of years. Given the uncertainty, investors may want to consider buying blue chip oil stocks rather than trading volatile commodity futures. Companies like Exxon Mobil are trading at low valuations with attractive dividends with enough assets to weather the storm and potentially deliver significant capital gains over the next few years.

Image courtesy of Vichaya Kiatying-Angsulee at FreeDigitalPhotos.net.