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

To: DavidG who wrote (32989)	12/17/1998 12:42:00 AM
From: Captain James T. Kirk	Read Replies (1) \| Respond to of 95453

Experts are split over whether oil prices will rebound, but they say, regardless, well-run oil companies are usually a good bet By Steve Frank THE WALL STREET JOURNAL Dec. 16 — It's déjà vu all over again. The U.S. goes to battle with Iraq and crude oil prices move higher because of the threat to the supply. Does that automatically mean investors should start buying oil stocks ? THAT ANSWER depends, in part, on where you think oil prices are going. Those who think oil prices are headed higher saw encouraging signs Wednesday. Crude oil future prices jumped over concerns that the flow of 2 million barrels of oil a day from Iraq might be interrupted. The near-month contract for the benchmark grade rose 83 cents — to $12.38 a barrel. There are a number of other signs that prices could jump. In Madrid, ministers from Saudi Arabia, Venezuela and Mexico will meet tomorrow to discuss potential reductions in those countries' oil production, which could lift prices. The trio was the main architect of agreements earlier this year among producers to cut 3.1 million barrels a day from world supplies. It's a critical meeting, one oil industry expert told CNBC. “I think the fact that they're meeting is a clear indication that they're worried that where they are now is not necessarily the floor. If the market doesn't believe that these producers' cuts will hold then you could see lower oil prices,” said Daniel Yergin, oil analyst, Cambridge Energy Research said Wednesday. U.S., U.K. begin strikes against Iraq And around the world, major oil companies are either merging or scaling back their capacity, which could also affect prices. Just yesterday, Royal Dutch/Shell Group announced a major restructuring and a $4.5 billion write-off for the fourth quarter. In the past year, the oil industry has undergone unprecedented changes as a result of low oil prices. The mergers of British Petroleum and Amoco Corp., as well as the union of Exxon Corp. and Mobil Corp. created oil giants. After squeezing as many costs as they could out of their own companies, oil executives concluded that the only way to weather the downturn was through consolidations. WILL THEY OR WON'T THEY? But for those who think oil prices will stay depressed — there is logic to support their reasoning too. After all, a military engagement won't necessarily interrupt Iraq's flow of oil and, in any case, oil inventories remain at record level. OPEC nations don't have the best track record of following through on promised production cuts either. And in Asia, there is little sign of the kind of sustained economic recovery that will resurrect the slump in that region's demand for oil. “I don't see any improvement in the short-run — at least six to nine months — before we see any glimpse of hope,” said Fadel Gheit, an energy analyst at Fahnstock. What Iraq could be hiding How does it all shake out for investors? Well, for those who see a price recovery, now might be the best time in a long time to think about exploring the oil stocks. After all, experts say, oil is a cyclical industry — and the cycle couldn't get much lower. “We are probably three to six months away, but probably no more than that, from a cyclical bottom in investment behavior. And when that happens, we're going to have a major turnaround in the group,” said Clark. But others say don't get into oil stocks on the assumption oil prices are headed higher any time soon. Quite the opposite, they recommend looking at only those giants companies in the sector that are big enough, diverse enough and efficient enough to keep making money, even if prices stay low.