energy Stocks: U.S. energy data supports oil and gas shares

Energy shares moved higher after federal data Thursday revealed large declines among refined crude products but the bullish data failed to spark any breakaway rallies in the largely range-bound sector.

The Amex Oil Index (XOI :1,171.33, +8.14, +0.7% ) was up 0.7% to 1,171.33 points as crude for April delivery picked up 88 cents to $60.95 a barrel. The Amex Natural Gas Index (XNG : 461.88, +2.38, +0.5% ) rose 0.5% to 461.88 points as natural gas climbed 1.1% to $7.72 per million British thermal units. The Philadelphia Oil Service Index ($OSX :0.00, 0.00, 0.0% ) added 1.8% to 1201.45 points.

Crude supplies rose 3.7 million barrels in the week ended Feb. 16, the Energy Department said. Distillate supplies dropped by 5 million barrels and gasoline supplies fell 3.1 million barrels. Natural-gas inventories went down 223 billion cubic feet in the latest week. See full story.

"With refinery maintenance season almost upon us, combined with the U.S. looking to start adding to the Strategic Petroleum Reserve, the large draw in petroleum inventories may prove to be a continuing trend," said Raymond James analysts in a note to clients. With oil prices essentially flat after a remarkable crude run investors can't just expect commodity prices to propel the sector's stocks, said Charles Gaffney, an energy and utility analyst with the Eaton Vance Utility Fund (EVTMX : 13.69, 0.00, 0.0% ) .

An educated investor should also consider a company's finding and development costs, reserve replacement ratios and cash flow as indicators of long-term health. On that basis, Occidental Petroleum Corp. (OXY :48.00, +0.23, +0.5% ) looks attractive considering the company spends about 50% of its free cash flow while the industry standard is closer to 80%, said Gaffney.

In a replay of the previous session, refiners paced the oil index's advance with Sunoco Inc. (SUN : 65.38, +1.29, +2.0% ) and Valero Energy Corp. (VLO :58.78, +0.88, +1.5% ) rising 2% and 1.5%, respectively. Among the majors, Exxon Mobil Corp. (XOM : 75.08, +0.30, +0.4% ) rose 0.4% to $75.08, Chevron Corp. (CVX : 70.67, +0.73, +1.0% ) added 1% and ConocoPhillips (COP : 66.88, +0.59, +0.9% ) picked up 0.9% to $66.68.

On the natural gas index, which consists of exploration and production companies, shares of Williams Companies, Inc. (WMB : 28.01, -0.32, -1.1% ) was among the loss leaders, falling 1.1% after reporting that its fourth-quarter net income more than doubled but revenue fell from the year-ago due to lower natural gas prices. See full story.

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