ENERGY STOCKS
Forecasters see market at its bottom
Oil shares turn around following big sell-off
By Myra P. Saefong, CBS.MarketWatch.com
Last Update: 12:52 PM ET Sept. 20, 2001
NEW YORK (CBS.MW) -- Shares of major oil-service companies turned higher Thursday afternoon, rebounding amid expectations that the sector may be reaching a bottom just a day after a key index dropped to its lowest point in more than two years.
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After another negative start, the Philadelphia Oil Service Index ($OSX: news, chart, profile) gained as much as 0.9 percent to 66.48 but gave back those gains and was little changed in recent action. On Wednesday, the index touched its lowest level in 29 months at 62.76.
Within the index, shares of Global Industries (GLBL: news, chart, profile) tacked on 30 cents to trade at $5.74 and shares of Transocean Sedco Forex (RIG: news, chart, profile) rose 95 cents to stand at $26.45.
"After the massive sell-off of the last several days, we now believe that the energy stocks are at or very near the bottoming point," analysts at Raymond James said in a research note.
The investment firm said it sees a 20 percent to 30 percent probability of a near-term oil supply disruption stemming from fresh Middle East tensions following the Sept. 11 terrorist attacks. It also said there's an 80 percent chance of a disruption in the next two years as the "new war" of the U.S. moves to involve other oil-producing countries.
Paul Ashby, an analyst at ABN-Amro, said he was recommending an "overweight" allocation in the oil and natural gas sector. "A global recession is fast becoming the accepted near-term outlook," he wrote in a research note. However, "OPEC still holds the key," Ashby added, noting that the cartel is set to meet on Sept. 26 to discuss oil production and demand.
Integrated oil stocks continued lower, however, with the CBOE Oil Index ($OIX: news, chart, profile) down by 1.7 percent to 285.1.
Shares of Chevron (CHV: news, chart, profile) declined by 48 cents to $84.42 while ExxonMobil (XOM: news, chart, profile) slipped by $1.20 to $37.21.
On the upside, the Amex Natural Gas Index ($XNG: news, chart, profile) rose by 0.7 percent to 182.07. Shares of Pogo Producing (PPP: news, chart, profile) climbed by 53 cents to $24.67 and Ocean Energy (OEI: news, chart, profile) added 16 cents to $16.56.
Oil futures ease on demand prospects
Oil futures traded slightly lower Thursday in New York as economic weakness and threat of U.S. retaliation to the recent terrorist attacks tugged at near-term market prospects for oil demand.
A full blown recession in the U.S. and a weaker global economy has increased the risk that oil prices will substantially weaken, ABN-Amro analyst Paul Ashby said in a research note, but offsetting this over the near-term is the risk of an oil price spike if military action disrupts oil supplies.
On the New York Mercantile Exchange, crude futures for October delivery fell by 42 cents to trade at $26.30 a barrel a day after a drop to a one-month low, while November crude fell by 51 cents to $26.60 a barrel.
Nymex opens for crude trading at 10:45 a.m. and closes at 1:45 p.m. Eastern time all week.
Also on the exchange, October unleaded gasoline slipped by 2.25 cents to 73 cents a gallon, while October heating oil climbed by 0.45 cent to 72.35 cents a gallon.
Over in London, November Brent crude turned lower by 22 cents to $26.12 a barrel.
The latest reports from the American Petroleum Institute and the Energy Department revealed declines in both gasoline and crude inventories during the week ended Sept. 14, but indicated that distillate supplies climbed. See full story.
Natural gas prices drop on stock rise
Prices for natural gas continued to fall Thursday after a reported rise in last week's U.S. supplies of commodity.
The American Gas Association posted a 90 billion cubic foot increase in natural gas inventories to 2,757 billion cubic feet. The data were released at 11:30 a.m. Eastern time Thursday, a day late at the request of Nymex.
Analysts at DRI-WEFA, a unit of Global Insight, predicted a rise of 92 billion cubic feet in natural gas supplies during the week ended Sept. 14. A year ago, supplies rose by only 67 billion cubic feet.
Following the data, October natural gas traded at $2.08 per million British thermal units, down 2.2 cents.
"There is a lot of excess supply, but gas prices are getting to the point were they are competitive to coal so they shouldn't drop much further for October," said Ron Denhardt, an analyst at DRI-WEFA.
However, with forecasts for a recession, prices will have to be low enough next year to cause declines in natural gas production, he said. "It is going to be ugly for producers."
Ahead of the data's release, Banc of America Securities analyst Mark Fischer cut his 2001 natural gas price forecast to $4 from $4.20 per million British thermal units and his 2002 estimate to $2.95 from $3.25. "The rising working gas storage surplus remains a major concerns for the gas market," he said in a research note.
Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco. |
