Early action saw the Amex Oil Index (XOI :1,353.97, -7.43, -0.5% ) rise 0.7%. The Amex Natural Gas Index (XNG : 515.90, -2.05, -0.4% ) added 0.2%, bouncing back from a weaker opening, but then faltered to return to the previous session's closing level while the Philadelphia Oil Service Index ($OSX :249.29, -4.16, -1.6% ) languished in a slightly lower trading range, last down 0.4%.
Oil stock bulls turned a blind eye to a pullback in the June crude-oil futures, which were off 58 cents at $65.69 a share on the New York Mercantile Exchange. The June contract expires at the end of trade Tuesday. See Futures Movers.
Oil stocks resumed their upward climb Tuesday, putting the sector again on track toward record territory after shaking out a few investors at the open who were looking to lock in recent gains.
With little fundamental news to roil the market and energy traders reluctant to take big positions ahead of Wednesday's weekly inventory data, analysts predicted energy stocks would likely be swayed by fluctuations in the broader stock market.
Chevron Corp. (CVX :82.18, -0.65, -0.8% ) agreed to sell its 96.9 million-share stake in Houston power company Dynegy Inc. (DYN :9.83, -0.34, -3.3% ) through a public offering. Chevron said it expects to generate about $940 million from the sale, which is part of the company's plan to shed non-core assets.
Shares in Chevron were up 0.3% early Tuesday while Dynegy shares were down 2.7%.
Investors, lured by strong refining margins, continued to favor refining stocks, with Sunoco Inc. (SUN :78.11, +0.81, +1.0% ) up nearly 2% to lead percentage gainers in the group, and Valero Energy Corp. (VLO : 75.75, -0.03, 0.0% ) up 1.4%.
A.G. Edwards, in an expansive research note on integrated oil companies, predicted that there is room for energy stocks to run higher, despite concerns about their bumping up against full value.
"The energy sector recently resumed a leadership role in the market with the integrated oil and gas group advancing 13% year-to-date (vs. the S&P 500, which is up 8%), but is still discounting an estimated $48 oil price, which is well below the 12-month futures strip of $69 and out projected trading range of $55-$75 (a barrel)," A.G. analyst Bruce Lanni said.
"Anticipating the oil market fundamentals will remain relatively firm (both upstream and downstream), it is our opinion that a re-valuation of the group will continue, as higher oil prices persist and the market becomes for comfortable with the strength of the underlying supply/demand fundamentals," he added.
Going through the sector, Lanni upgraded Marathon Oil Corp. (MRO : 116.32, +0.25, +0.2% ) and Royal Dutch Shell Plc (RDSA : 74.52, -0.32, -0.4% ) to buy from hold and downgraded BP Plc (BP : 68.18, -1.26, -1.8% ) to hold from buy. At the same time, Lanni reiterated buy ratings on Chevron and Occidental Petroleum Corp. (OXY : 54.52, -0.27, -0.5% ) and kept hold ratings on ConocoPhillips (COP :75.85, -0.01, 0.0% ) , Exxon Mobil Corp. (XOM :82.77, -0.82, -1.0% ) , Hess Corp. (HES :59.31, -1.28, -2.1% ) and Murphy Oil Corp. Murphy Oil Corporation (MUR : 60.11, -0.88, -1.4% ).
Blogalaxia Tags: OXY,Dynergy,Valero
