Blogalaxia Tags: Hydrogen Energy,Nigeria,Valero,Stocks
Energy stocks charged ahead Friday, riding into record-high territory on a rally in oil prices that pushed June crude futures past $65 a barrel in New York.
By mid-afternoon, the Amex Oil Index (XOI : 1,344.87, +19.07, +1.4% ) was up 1.6%, adding to Thursday's 1.5% gain. The Amex Natural Gas Index (XNG :509.42, +5.94, +1.2% ) was ahead 1.4% and the Philadelphia Oil Service Index ($OSX :250.52, +2.71, +1.1% ) was up 1.3%. The indexes were on course toward all-time closing highs, wrapping up two days of solid gains in a week that began with three days of lateral drift.
Heightened tensions in Nigeria, where labor unions were threatening a two-day strike later this month to protest recent presidential elections, raised fresh concerns over the flow of crude supplies from the country, which has been hobbled this month by rebel actions aimed at its oil fields. The market also continues to fret about low U.S. gasoline supplies heading into summer. The industry has been plagued by unscheduled refinery outages, keeping margins high for those producers whose units are running. The combination of supply concerns and strong fuel demand sent June crude-oil futures as high as $65.64 a barrel on the New York Mercantile Exchange. The contract was last trading at $65.23, up 37 cents from Thursday's close. See Futures Movers.
Big overseas integrated oil companies continued to grab much of the attention Friday, with U.S.-traded shares of France's Total S.A. (TOT : 75.98, +1.87, +2.5% ) up 2.5% and London-based BP Plc (BP :68.91, +1.24, +1.8% ) ahead 1.8% to lead percentage gainers in the group.
Royal Dutch Shell Plc. (RDSA :74.10, +1.39, +1.9% ) was not far behind, up 2%, while ConocoPhillips' (COP :74.95, +1.70, +2.3% ) topped gains by the U.S. oil companies, up 2.2%, ahead of No. 1 Exxon Mobil Corp. (XOM :82.97, +1.17, +1.4% ) and No. 2 Chevron Corp. (CVX :82.61, +1.15, +1.4% ) , which were both trading 1.5% higher.
Royal Dutch Shell also got an early boost from a round of speculation among European traders that it might be mulling a merger with BP. Industry analysts remained skeptical, however, as they have when the same rumor surfaced in the past. The two companies, citing policy, declined to comment on market speculation. Despite several months of some of the strongest margins and earnings seen in the industry, independent refiners were downgraded Friday by Credit Suisse to underweight from market weight.
"Gasoline supplies have begun to rebuild over the past two weeks and we believe that the U.S. gasoline market is starting to turn the corner," Credit Suisse analyst M. Flannery wrote in a research note.
Among the big independent refiners, shares of Valero Energy Corp. (VLO :73.83, +0.76, +1.0% ) were up 1.2%, Sunoco Inc. (SUN :75.85, +1.64, +2.2% ) was up 2.3%, and Tesoro Corp. (TSO :118.81, +2.31, +2.0% ) was ahead 2.3%.
On the broker front, Calyon Securities analyst Mark Urness raised his rating on oil drilling contractor Nabors Industries Ltd. (NBR :35.89, +0.26, +0.7% ) to add from neutral and bumped up the target price to $40 a share from $30.
The move was founded in Urness's conviction that the North American onshore drilling market is on the brink of an upswing.
"With the natural gas [price] strip well above $8 per million British thermal units and operators much less fearful of a spring/summer price collapse, we believe North American drilling activity will firm up during the second half of 2007," Urness said in a research note. Nabors shares were trading at $35.96, up 1% for the day. The June natural-gas futures contract on Nymex was at $8.05 per million Btu, down almost 0.3%.
Investors swept into the energy sector Thursday, seizing on a 4% jump in gasoline futures to pump up stocks and sending all three of the industry's indexes to record highs.
After a sluggish opening, a clear "buy" signal was heard in the U.S. fuel market, pushing the Amex Oil Index (XOI :1,344.25, +18.45, +1.4% ) 1.5% higher to 1,325 points, an all-time high and its biggest one-day move so far this week.
The Amex Natural Gas Index (XNG : 509.24, +5.76, +1.1% ) finished 1.2% higher at 503.5 points, benefiting from moderately bullish supply data, while the Philadelphia Oil Service Index ($OSX : 251.01, +3.20, +1.3% ) rose 2% to 247.8 points - both record-high closes.
Backing the move, June reformulated gasoline futures on the New York Mercantile Exchange rose 9.96 cents, or 4.3%, to $2.437 a gallon, a record for the contract. That, in turn, triggered a $2.31 rally in June crude-oil futures to $64.86 a barrel, with the contract running as high as $64.90 during the session. See Futures Movers.
The surge in gasoline prices stems from a host of refinery problems dogging the sector. Valero Energy Corp. (VLO :73.97, +0.90, +1.2% ) is working to bring its Houston refinery back up to full production following problems this week with the plant's boiler. After taking a beating for the outage Wednesday, Valero stock rose 1.4% to $73.07. Despite a bearish 1.7 million-barrel rise in gasoline inventories reported Wednesday by the Energy Information Administration, analysts point to a utilization rate of just under 90%, which is low for this time of year and a major reason for gasoline stockpiles languishing well below the five-year average seasonal low.
Also attracting buyers was an Energy Information Administration report that U.S. natural gas supplies in storage rose 95 billion cubic feet last week, slightly less than the 98 billion cubic feet many traders had been looking for. June natural-gas futures jumped 18.5 cents to $8.075 per million British thermal units.
Gains on the commodities side of the business translated into across-the-board gains for integrated oil companies and refiners. Shares of Royal Dutch Shell Plc (RDSA : 74.11, +1.40, +1.9% ) led the pack, up 3.1% in New York to close at $72.71. Among the top three U.S. oil companies, ConocoPhillips (COP : 74.94, +1.69, +2.3% ) advanced 2.5%, Chevron Corp. (CVX :82.69, +1.23, +1.5% ) rose 0.9%, and Exxon Mobil Corp. (XOM :83.07, +1.27, +1.6% ) rose 0.4%.
London-based BP Plc (BP : 68.96, +1.29, +1.9% ) announced it has formed a 50-50 joint venture with coal miner Rio Tinto to develop low-emissions electric power by converting fossil fuels into hydrogen and then capturing and storing the byproduct carbon dioxide. The new company, Hydrogen Energy, aims to capture 90% carbon dioxide released from the conversion process and then store the CO2 permanently in geological formations "deep beneath the Earth's surface," Rio Tinto and BP said in a statement.
Rio Tinto will make a cash payment to BP of $32 million as part of the agreement. See full story. BP shares rose 1.9% to close in New York at $67.67.
