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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: JGreg who wrote (52344)	10/4/1999 11:26:00 AM
From: Tomas	Read Replies (1) \| Respond to of 95453

Investors who sell oil, gas are headed into cold: analysts - Globe & Mail, October 2 Despite rising crude price, TSE subindex has fallen in the past month GUY DIXON and ANDREW BELL, Investment Reporters Investors in oil and gas stocks are selling just when most analysts argue they should be buying. "We think it's a huge mistake, and we believe the sector has significant upside as we head into the winter," said Peter Linder, a Calgary-based oil industry analyst at CIBC World Markets. With the price of crude oil briefly touching $25 (U.S.) a barrel this week and doubling in price this year, the Toronto Stock Exchange's oil and gas subindex nevertheless has fallen in the past month, down more than 9 per cent since its high of 6,908 points Sept. 9. Some of the movement out of the energy sector has more to do with the overall market than with the oil and gas industry specifically, analysts say. The sudden rebound in gold prices this week caught the market off-guard and probably contributed to the decline in oil shares, as investors transferred some capital into bullion stocks. The TSE's oil and gas stocks hit their lowest level in two months after news this week that Europe's central banks were limiting their sales of gold. Some of the decline may also come from the worry that the rise in crude won't last. "Investors have made some good money in the past six months in the oil and gas sector, and so they are taking profits," Mr. Linder noted. Investors may be reluctant to bet that the Organization of Petroleum Exporting Countries (OPEC) will maintain its production cutbacks. So far, OPEC has largely stuck to its self-imposed, 8-per-cent production cuts that its member states agreed upon in March. The latest data show about 95 per cent compliance by OPEC nations. Yet there is the fear that if oil prices continue to rise, OPEC member states will have more incentive to cheat and raise production. "If there's any slippage in OPEC discipline, there's a perception that the price of oil would decline," said Henry Cohen, oil analyst with Credit Suisse First Boston in Toronto. "As the commodity rises, you might start to get increased OPEC production, which will moderate that price increase. And initially the equity market may get a little spooked by that." Some predict that if OPEC were to renege on its cutbacks this winter, oil prices could quickly slide by $5 a barrel. Crude closed yesterday in New York at $24.54 a barrel. However, rising global demand could soon mitigate concerns about production cutbacks, Mr. Cohen said. He predicted that within a few months, OPEC may even begin to start producing near capacity simply to meet world demand. "It is inevitable that we will get into a supply squeeze," Mr. Cohen said. Even if energy prices don't continue to rise, some see conditions as being better than they have been in years. The price per barrel for heavy oil is around $18 (Canadian), and exploration and development costs are closer to $2, Mr. Linder noted, adding that "this is fantastic."