Oil sector faces downgrades and cuts
Opec decision casts gloom over oil stocks, say analysts
By Friedel Rother, FTMarketWatch.com 12:14:00 PM GMT Nov 15, 2001
LONDON (FTMW) - Oil stocks were the focus of several downgrades and bearish comments from analysts on Thursday as Opec said it wouldn't cut production levels unless non-members did the same.
Deutsche Bank and Teather & Greenwood both downgraded the sector as a whole to "underweight" from "neutral" while Morgan Stanley lowered its sector rating to "neutral" from "outperform".
"This is a decidedly bearish development for oil equities," Deutsche said in a research note, before cutting its fourth-quarter Brent price forecasts to $20 from $24.
BP, Shell, TotalFina cut
Individual stocks were also hit. Morgan Stanley downgraded British Petroleum [UK:BP, News, Chart, Research] and France's TotalFinaElf [FR:012027, News, Chart, Research] to "outperform" and cut Royal Dutch/Shell [US:RD, News, Chart, Research] to "neutral".
Teather & Greenwood cut Shell [UK:SHEL, News, Chart, Research] and Enterprise Oil [UK:ETP, News, Chart, Research] to "sell" from "hold" and reiterated its "sell" rating on BP and BG Group [UK:BG, News, Chart, Research] .
Meanwhile, Deutsche Bank said its favourite oil stocks included Eni [US:E, News, Chart, Research] , Repsol [US:REP, News, Chart, Research] , BG, BP, Norsk Hydro [SE:000014753, News, Chart, Research] , Shell [US:SC, News, Chart, Research] and Statoil.
Shares in oil stocks were down across the board on Thursday, with Shell logging a 5.3 percent fall at the top of the FTSE decliners list and BP 4.3 percent lower. BG Group lost 3.9 percent, Enterprise Oil was 3.6 percent lower and TotalFinaElf was off 4.7 percent.
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Looking ahead, Teather & Greenwood told investors to "expect a raft of downgrades" and said it was "difficult to suggest that oil equities can do anything other than underperform the market in the near term."
Morgan Stanley warned that the sector looked set to "become a victim of its own success in past years" and said "we expect dull relative performance as investors favour sectors geared to market recovery."
However, ABN Amro commented that while short-term investors should reduce their exposure to oils, those looking at the longer-term should watch for "highly attractive buying opportunities". |
