Oil and gas stocks rose at the open Thursday as upward momentum from the previous session continued to buoy the sector. The same factors were again in play, with the Dow Jones Industrials (.DJI : 13,555.19, +72.84, +0.5% ) piling another 70 points onto Wednesday's 187-point gain and the July crude-oil futures topping $67 a barrel. See Futures Movers.
Action in the trading floor of the New York Mercantile Exchange remained focused on Wednesday's bullish U.S. fuel supplies report. A key ingredient of the data was a drop in the nation's refinery utilization rate to 89.2%, compared with a seasonal norm closer to 93%. The unexpected setback stirred fears that supplies might lag demand, offsetting recent output gains by refiners.
By mid-morning, the bullish sentiment had translated into a 1.6% advance to 1,405 points on the Amex Oil Index (XOI : 1,408.17, +24.76, +1.8% ) , with U.S.-traded shares of France's Total SA (TOT : 77.32, +2.26, +3.0% ) in the vanguard on a 2.7% rise to $77.11. Index heavyweight Exxon Mobil Corp. (XOM : 84.69, +1.34, +1.6% ) was also making strides, up 1.3% to $84.43, adding its heft to the rise in the Dow Jones Industrials. The Amex Natural Gas Index (XNG : 525.11, +8.22, +1.6% ) was ahead 1.7% at 525.5 points and the Philadelphia Oil Service Index ($OSX :262.30, +5.56, +2.2% ) was up 2% at 261.9 points, building on a 3% gain Wednesday.
In the oil service group, National Oilwell Varco Inc. (NOV :105.19, +3.36, +3.3% ) rose just over 3% to notch a 52-week high of $106.04 a share, and Rowan Cos. (RDC : 39.96, +0.93, +2.4% ) stock was up 1.5% at $39.62 after Credit Suisse raised its target price on the company to $45 a share from $42. All of the sector's oil drilling companies have been putting on handsome gains this week, reflecting a tight offshore rig market and producers' scramble to advance exploration and development programs while cashflows are strong.
Chevron Corp. (CVX :82.22, +1.07, +1.3% ) will not resume drilling on the promising Jack field in the Gulf of Mexico until 2008 due to a shortage of deepwater drill rigs, the company told Bloomberg Wednesday. Initial tests on the Jack field discovery indicate a reservoir with perhaps as much as 15 billion barrels of recoverable crude.
Sometimes more than rig shortages get in the way, however. BP Plc. (BP :68.85, +0.49, +0.7% ) confirmed that it is suspending its drilling program off Viet Nam while Viet Nam and neighboring China sort out a border dispute in territorial waters they both claim.
The Energy Information Administration reported U.S. natural gas in storage rose 92 billion cubic feet last week. Energy traders were looking for a build closer to about 100 bcf. Overall gas stocks are currently 2.255 trillion cubic feet, down 131 bcf from a year ago but still 365 bcf above the five-year average.
