Shares of oil and gas companies edged higher early Thursday as Wall Street steadily improved following overnight gains in Asia and Europe.
The Amex Oil Index (XOI :1,155.59, +7.62, +0.7% ) moved up 0.5% to 1,153.38 points as the price of a barrel of crude held steady, while the Amex Natural Gas Index (XNG :455.32, +2.03, +0.4% ) rose 0.4% to 455.25 points as natural-gas futures came under moderate selling pressure. See Futures Movers.
The Philadelphia Oil Service Index ($OSX :203.23, +2.09, +1.0% ) rose 0.8% to 202.80 points. The recent volatility in energy-sector shares stresses the importance of wise stockpicking rather than rushing into an entire sector, said Dan Pickering of Pickering Energy Partners.
"We forced ourselves to take a step back and assess what's actually working (and what isn't) in energy space so far this year," said Pickering in a pre-market note to clients. "Summary observation -- stockpicking critical, downstream on fire, land/offshore drillers bringing up rear. Action items -- time to add to offshore drillers (too beaten up this year)."
Pickering noted he believes that some oil-services providers have taken too much of a hit and are worth buying at current levels. Noble Corp. (NE : 72.68, +1.86, +2.6% ) , an offshore driller with a what he called a "great" mix of assets and geographic exposure, is off 7% this year, Pickering said. Shares of Noble traded nearly 2% at midmorning.
Moreover, Pickering said he recommends Baker Hughes Inc. (BHI :65.26, +0.89, +1.4% ) and Anadarko Petroleum Corp. (APC :40.26, +0.16, +0.4% ) for patient investors willing to stomach the sector's volatility over the next year. Shares of Baker Hughes, which got slammed earlier this year after disappointing earnings results, are down 13% so far this year.
Within the oil index, industry leader Exxon Mobil Corp. (XOM :71.74, +0.10, +0.1% ) was the sole component in the red, slipping 0.4% to $71.37. Chevron Corp. (CVX :68.65, +0.32, +0.5% ) also lagged the sector, rising 0.1% to $68.42.
The majors, which last year outperformed the general market, are as a sector down nearly 7% for the year.
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