Oil stocks dug in Tuesday, clinging to the previous session's strong gains, while the natural-gas stocks benefited from a Credit Suisse upgrade of El Paso, Questar and Equitable Resources.
The trading pits on the New York Mercantile Exchange were giving the sector a slightly bullish nudge, with the April crude-oil contract up 20 cents at $56.79 a barrel. The April natural-gas contract was up 8 cents at $6.93 per million British thermal units. See Futures Movers.
By mid-morning, the Amex Oil Index ($XOI : 1,162.17, +8.00, +0.7% ) was unchanged at 1,154 points and the Philadelphia Oil Service Index ($OSX :204.50, -3.92, -1.9% ) was ahead 0.2% at 208.9 points, adding to Monday's 2.8% rally. The Amex Natural Gas Index ($XNG :458.70, +2.71, +0.6% ) was up 0.4% at 457.1 points.
The trading pits on the New York Mercantile Exchange were giving the sector a slightly bullish nudge, with the April crude-oil contract up 20 cents at $56.79 a barrel. The April natural gas contract was up 8 cents at $6.93 per million British thermal units. See Futures Movers.
But Credit Suisse's note on several key natural gas companies was catching investors' attention. The broker recommended leveraging recent market weakness to capture a likely rebound in the sector, citing what it called compelling value.
El Paso Corp. (EP : 14.37, +0.33, +2.4% ) was upgraded to market perform from neutral, as was Equitable Resources, Inc. (EQT :46.10, +0.93, +2.1% ) and Questar Corp. (STR : 86.95, +0.12, +0.1% ) . El Paso was up 1.8% on the note, Equitable advanced 2.5%, and Questar was showing a 0.6% gain.
"We are raising ratings to Outperform from Neutral on all three stocks as each one presents investors with total return potential of approximately 20%, only slightly behind top pick Williams (WMB :27.02, +0.03, +0.1% ) with 25% total return potential," Credit Suisse said in its note.
"While we are cognizant of raising ratings right before the potential spring doldrums that often occur in gas prices during the shoulder season, we would use any resulting stock weakness as a buying opportunity given greater conviction by the Credit Suisse natural gas team that commodity prices will be 'higher for longer' for structural rather than cyclical reasons," it added.
At the same time, Credit Suisse cut its rating on Oneok, Inc. (OKE :45.04, -0.75, -1.6% ) to neutral from outperform, citing valuation following the company's strong performance relative to others in the group. Oneok shares were off 1.8%. MarketWatch
