T Alex Brown Bullish On Oil Prices, Oil Stocks Mar 16 1999
Dow Jones Newswires
LONDON -- The revitalized oil sector received a further boost Tuesday
when
the top rated oil team at BT Alex.Brown put out bullish forecasts about
the
prospects for the oil price and for oil stocks.
Analyst Fergus MacLeod, who has been ranked the top oil analyst several
times in the annual Extel awards, said that last week's planned cuts -
expected
to be above 2 million barrels a day - in Amsterdam were way beyond
anything
expected and "greatly increase our confidence we will see a further
significant
rise in oil prices over the rest of the year." He joins other followers
in
anticipating a strong recovery in oil prices and oil stocks.
Oil prices have recovered strongly in anticipation of large-scale cuts
and
briefly hit $13 a barrel last week, after last week's success in
Amsterdam.
Front-month Brent closed Monday at $12.56 a barrel. Oil stocks, both
large
and small have responded to the higher price with strong gains.
The cuts - the exact figure won't be given until the OPEC meeting in
Vienna,
which starts on March 23 - have helped the oil price climb out of the
$10
abyss and investors are returning in anticipation of higher prices.
Bulls like MacLeod feel vindicated.
"Our long-standing forecast of a $16 oil price by the end of the year is
underpinned (barring a further global economic meltdown) and $18 in the
medium term looks increasingly likely," MacLeod said in a daily note.
The planned cuts alter the balance of risk in the sector and underweight
positions should be closed out in the next few weeks, he said, "before
spot oil
prices begin to reflect the fall in previously bloated oil inventories
that is
increasingly likely to occur."
Even after last week's rise, the oil majors' share prices are still
discounting
Brent oil prices of $13 to $14.
"As inventories are drawn down from April/May and through the year-end,
oil equities are likely to continue to outperform the market," he said.
The oil exploration and production sector should benefit strongly, said
BT
Alex.Brown's sector analyst Caroline Cook. "The share prices of E&P
stocks
have historically under performed the majors except in periods of
exceptional
oil price recovery," she said.
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