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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: Bearcatbob who wrote (7162)	3/3/2000 7:56:00 PM
From: AL R	Read Replies (1) \| Respond to of 24921

A clip from msn.money on Oil Stocks. "People act like these companies are going out of business," says John Segner, who manages the Invesco Energy Fund (FSTEX), which gained 53% in the 12 months ending Jan. 31. "But there is actually nothing wrong with them, and they are making a lot of money. The fundamentals are terrific." Why the disconnect? There are three reasons. 1.Money managers still can't believe oil prices will remain high. Though it is tough to predict the price of crude, there are several reasons to think that oil-shy fund managers are wrong about this. The main problem is that the potential oil stock investors obsess about Organization of Petroleum Exporting Countries (OPEC) supply, when they should really be looking at demand, says Segner. It likely will continue to outstrip supply unless OPEC makes really drastic changes. To see why, consider some numbers. The booming world economy has pushed global oil demand to 77 million barrels a day, up from 75 million last year. But current production offers much less -- about 74.5 million per day. The difference comes from inventory, which has been drawn down to near-record lows. In short, OPEC could agree to crank out as many as 2.5 million more barrels a day and the only change would be that inventories would stop declining, says Segner. "Most people don't understand that. They assume that OPEC is going to come in and make the price of oil drop significantly. It might come down to $24 or $25 a barrel, but we are not going back to $18." Nevertheless, most analysts on the sell side are using oil prices of around $19 a barrel when they compute their earnings and stock price targets. That leaves room for lots of upside, if Segner is right. Don't be surprised if he is, because the demand-supply equation probably will only get tighter. Segner expects global demand will increase to 79 million barrels a day in 2001. But maximum output right now is only 80 million barrels. "That is just incredibly tight and it means we are not going to have real cheap oil prices any time soon. Before you increase maximum output, you have to make up for the 2 million of natural depletion each year." 2.A recent antitrust investigation has put the kibosh on merger speculation in oil stocks. The Federal Trade Commission denies its investigation of the BP Amoco (BPA)-Atlantic Richfield (ARC) marriage signals a policy shift toward tighter scrutiny. But investors are not so sure. So they have fled the potential deal stocks such as Unocal (UCL), Kerr-McGee (KMG), Texaco (TX) and lots of others. 3.The shift from value to growth stocks. Old Economy plays like oil are suffering as investors yank money from value funds and give it to growth managers chasing the latest hot tech issues. Combined, these factors have discounted many oil stocks to attractive levels.