Energy stocks followed the broader market to close deep in red territory Thursday despite a major upgrade of the oil services sector by Goldman Sachs.
The Amex Oil Index (XOI :1,305.03, -45.55, -3.4% ) closed down 3.4% at 1,305 points. The Amex Natural Gas Index (XNG :484.72, -15.53, -3.1% ) gave up 3.1%, and the CBOE Oil Index (OIX : 718.81, -25.16, -3.4% ) dropped 3.4%. The Philadelphia Oil Service Index ($OSX : 257.56, -7.63, -2.9% ) declined 2.7%. Crude futures dropped to below $70 a barrel before finishing down 56 cents at $71.59 amid overall economic jitters tied to the subprime mortgage meltdown.
Chevron Corp. (CVX :81.11, -3.22, -3.8% ) fell 3.8% after the company said it made a significant discovery off the coast of Angola. Occidental Petroleum (OXY :54.60, -1.76, -3.1% ) fell 3.1%.
Goldman Sachs analysts on Thursday upgraded the oil service and oil drilling sector to attractive from neutral.
"We believe we are in the early stages of a multi-year investment period and believe the recent correction provides an attractive entry point," Goldman said in a note to clients. "We are bullish on the outlook for crude oil prices through 2008 and believe exploration and production spending growth estimates are conservative."
Diamond Offshore (DO :94.67, -1.88, -1.9% ) remains a favorite, and analysts also upgraded Pride International (PDE :33.89, -0.33, -1.0% ) to a buy. Goldman reiterated buy ratings on Baker Hughes (BHI :79.41, -0.04, -0.1% ) , Weatherford (WFT : 55.44, -1.19, -2.1% ) and National Oilwell Varco (NOV. :0.00, 0.00, 0.0% ) .
Still, Diamond Offshore shed 2% to end at $94.67, Baker Hughes gave up 4 cents to end at $79.41 and National Oilwell Varco fell 2.8% to finish at $110.94. Weatherford lost 2.1% to $55.44.
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