Pace predicted a ``screaming shortage' of gas later this year as U.S. production and imports fail to keep pace with booming demand, led by the increasing use of gas for power generation.
Analysts said the outlook for oil was also encouraging, because global demand was rising again and OPEC producers were unlikely to oversupply the market, despite their decision earlier this year to raise production, a move which brought U.S. oil prices back to the mid $20s a barrel from peaks above $30.
U.S. exploration and production stocks rallied strongly from March 1999, supported by OPEC production cuts that sparked the recovery in crude oil prices, but were hit hard by profit-taking and rotation into technology stocks from September 1999.
The Standard & Poor's oil exploration index (^SPOILP - news), which is made up of six exploration and production stocks, ended up with a gain of 17 percent for 1999 and is up about seven percent so far this year.
Based on comparisons with previous oil and gas industry cycles Christensen believes there is 70 percent further upside ahead for exploration and production stocks, adding that his favourite picks included EOG Resources Inc.(NYSE:EOG - news) and Devon Energy Corp.(AMEX:DVN - news).
Pace, whose favoured stocks include Burlington Resources Inc.(NYSE:BR - news) and EOG, believes the sector can show stock price appreciation of 35-40 percent in the next 6-9 months, after gains last month corrected what he termed ``silly undervaluation'.
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