Exxon Mobil, Other Oils Fall on Downgrade
Wednesday March 12, 3:08 pm ET
NEW YORK (Reuters) - Shares of Exxon Mobil Corp. (NYSE:XOM - News), the world's No. 1 publicly traded oil company, fell more than 3 percent on Wednesday, after J.P. Morgan downgraded its rating on the integrated oil sector.
Several of Exxon Mobil's overseas rivals, including BP Plc (London:BP.L - News), TotalFinaElf (Paris:TOTF.PA - News), and Royal Dutch/Shell Group (Amsterdam:RD.AS - News; London:SHEL.L - News), also fell, leading markets lower across Europe.
Analyst David Wheeler of J.P. Morgan downgraded the sector to "neutral" from "overweight," saying the shares of the integrated oil companies have outperformed their respective equity markets and are trading within 2 percent to 6 percent of their all-time highs relative to the benchmark Standard & Poor's 500 index (^GSPC - News).
"While we still see industry fundamentals as solid, we would recommend moving to a neutral position in the sector from an overweight one, as the group could struggle to outperform further from here in the short term," he wrote in a report,
"We think there may be a better opportunity to buy the stocks in a month or two."
One fund manager disagreed with the J.P. Morgan call.
David Cooley, investment officer at J. & W. Seligman & Co., said he doesn't think it's time to get out of the sector because rising demand for oil and the challenge in finding it will boost stock prices.
Though Exxon Mobil has outperformed the S&P 500, the stock is still down 1 percent year-to-date and about 25 percent from its 52-week high.
Exxon Mobil isn't alone. The biggest integrated oil companies have all seen their share prices drop since the start of the year, despite fourth-quarter profits that were boosted by a surge in crude oil and natural gas prices.
Higher commodity prices translate directly to higher profits for oil companies involved in exploration and production, but it's unclear whether investors will reward the companies any time soon for soaring corporate profits.
The biggest concern is the volatility of oil prices, which zoomed up to $40 a barrel and then dropped back to $20 a barrel within a matter of months during the 1991 Gulf War. Crude oil prices recently have approached $40 a barrel, lifted by fears of a potential war in Iraq and a slump in U.S. heating fuel supplies.
Integrated oil companies are involved in both upstream exploration and production and downstream refining and marketing operations.
Exxon Mobil, among the most actively traded shares, fell $1.13, or 3.3 percent, to $33.44 midday Wednesday on the New York Stock Exchange (News - Websites).
Meanwhile, BP closed down 6.1 percent on the London Stock Exchange, while TotalFinaElf closed down 5.6 percent on the Paris bourse and Royal Dutch closed down 5.3 percent on the Amsterdam exchange.
The major Canadian oil companies -- EnCana Corp. (Toronto:ECA.TO - News), Petro-Canada (Toronto:PCA.TO - News) and Talisman Energy Inc. (Toronto:TLM.TO - News) -- were also down slightly on the Toronto exchange.
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When the bellwether sneezes, the small fry catch a cold I guess.
Note also that your buddy Raymond blew out 100,000 of his XOM shares the other day. |
