Oil stocks, lifted last week by an OPEC price accord and signs of tension in the Persian Gulf, posted sharp gains Thursday as Iraq's invasion of Kuwait sent oil prices to their highest levels since January.
Although stocks overall declined steeply in the heaviest trading since October, energy-related issues surged on expectations of higher oil prices from a possible disruption of Middle East production.
After an opening frenzy propelled oil stocks to daily highs, they closed the session with more modest gains.
Topping the New York Stock Exchange's most active list was Chevron, closing up $1.675 at $80.375. Texaco was the second most active issue, finishing the day up $2.675 at $66.675. Other gaining issues included Unocal, up $2.125 to $33.25; Amoco, $2.875 to $58.25, and Atlantic Richfield, $5.00 to $135.50.
Analysts noted that companies with major oil reserves and exploration units stand to gain the most from a rise in crude oil prices, while firms that concentrate on refining and marketing could suffer.
The stock of large refiners fell, reflecting tighter profit margins from higher crude prices. Sun Co. lost $1.375 to $35.50, and Ashland Oil fell $1.625 to $32.25.
"Refiners usually have their margins squeezed in the short term," said Craig Schwerdt, an analyst with Drake Capital Securities in Santa Monica. "There usually is a 30- to 60-day lag before costs are passed downstream."
Oil-service stocks, however, climbed sharply. Schlumberger rose $2.25 to $68.75, Halliburton gained $1.75 to $57.375 and Baker Hughes advanced $1.375 to $33.375.
"There's just more confidence in projects as the price of oil goes up," said David Neisser, manager of Fidelity Select Energy Services, a mutual fund investing in oil service stocks. "As the price goes up, projects that the oil companies were considering become viable. Therefore, the service companies will be more in demand."
Oil prices jumped worldwide on news of Iraq's aggression in the Persian Gulf, which produces almost 25% of the world's oil. West Texas intermediate, the benchmark U.S. grade of crude, jumped $1.57 to $23.11 a barrel for September delivery. In London, North Sea Brent blend traded as high as $24 a barrel, up $3.20 and its highest price in four years.
The increases follow an agreement by the 13 nations of the Organization of Petroleum Exporting Countries last week to raise the target price of an average barrel of OPEC oil to $21 from $18, and to raise cartel production to 22.5 million barrels a day, a 400,000-barrel increase.
ENERGY STOCKS SURGE
Thursday Oil companies Close Change Atlantic Richfield $135.50 up $5.00 Texaco $66.675 up $2.675 Unocal $33.25 up $2.125 Mobil $67.25 up $1.875 Forest Oil $11.75 up $1.750 Chevron $80.375 up $1.675 Exxon $53.25 up $1.125 Phillips Petroleum $29.675 up $0.875 Thursday Oil services Close Change Schlumberger $68.75 up $2.25 McDermott $34.50 up $2.00 Halliburton $57.375 up $1.75 Baker Hughes $33.375 up $1.375