Oil and gas shares closed higher Wednesday after an unexpected drop in U.S. crude supplies sent stock prices rallying, but a mixed performance on Wall Street clipped the sector's gains from intra-day highs.
The Amex Oil Index ($XOI :1,147.97, +18.78, +1.7% ) finished 1.7% higher at 1,147.97 points after rising nearly 3% by the middle of the session. The Amex Natural Gas Index ($XNG : 453.29, -44369.71, -99.0% ) rose 1.1% and the Philadelphia Oil Service Index ($OSX : 201.14, +3.97, +2.0% ) finished 2% higher at 201.13 points. April crude oil futures in New York shot up to almost $62 a barrel after the Energy Department data reported a surprise 4.8 million-barrel drop in U.S. crude oil supplies for the week ended March 2. Prices eased off somewhat by the end of the session, closing $1.13 higher at $61.82.
Distillates, which include heating oil and diesel fuel, fell 1.3 million barrels to 123.2 million, while gasoline stocks fell for a fourth consecutive week, down 3.8 million barrels to total 216.4 million barrels. See Futures Movers.
While refined product supplies typically drop this time of year due to the large number of maintenance outages at the nation's refineries, crude oil supplies typically rise for the same reason, backing up ahead of the units restarting.
Analysts said that while energy stocks were responding Wednesday to underlying fundamentals in the commodities market, they still remained vulnerable to volatility in the broad equities market and any economic indicators showing a possible decline in manufacturing demand.
Refiners spiked following the supply data. Independent refiner Valero Energy Corp. (VLO :59.80, +1.96, +3.4% ) led the percentage gainers on the oil index, ending 3.4% higher at $59.80 a share. Philadelphia-based refiner Sunoco Inc. (SUN :65.36, +1.57, +2.5% ) rose 2.5% to $65.36, slipping from intra-day gains of over 4%.
Exxon Mobil Corp. (XOM :71.64, +0.64, +0.9% ) rose 0.9% to $71.64 a share. Chief Executive Rex Tillerson, speaking to analysts in New York, said the company plans to start up more than 20 new projects over the next three years that will add the equivalent of about a million barrels of oil to its overall daily production volume.
Standard & Poor's equity analyst Tina Vital said limited availability of engineering expertise and geopolitical tensions lend some risk to Exxon's projections and should continue to drive concerns about the reliability of global crude supplies.
Vital reiterated her strong buy recommendation on Exxon's shares and said the target price for the stock remains $89.
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