OPEC Action May Benefit Energy Industry Most
OPEC’s decision to raise oil production should serve the interests of both American drivers and Middle Eastern crude exporters, but the biggest winner of all may be international energy companies.
Shares of Exxon Mobil Corp. (ticker symbol: XOM), Chevron Corp. (CHV) and Texaco Inc. (TX)--which failed to win over investors even when crude oil prices reached nine-year highs recently--all rose smartly Wednesday after the Organization of Petroleum Exporting Countries said it plans to turn up the taps by 1.7 million barrels a day.
Analyst Jim Falvey of Dresdner Kleinwort Benson said the stock movement reflects confidence among investors that oil prices will settle into a less-volatile range following the OPEC meeting.
“People felt the longer crude oil was above $30 a barrel, the faster [it] was going to fall to $10 a barrel,” he said. “That, coupled with fact that we’re going to see unbelievable first-quarter earnings, has pulled investors back in.”
On Wednesday, Exxon gained $1.50 to $80.50, Texaco rallied $3.44 to $54.50 and Chevron climbed $3.63 to $88.50 on the New York Stock Exchange.
Integrated oil companies--such as Exxon Mobil, which produces as well as refines and markets oil--could in fact be helped by slightly lower crude prices. The sharp run-up in crude over the last year has outpaced the rise in fuels such as gasoline, hurting profit margins in the refining and marketing side of the business, said Gene Nowak of ABN Amro.
Meanwhile, drilling companies, whose stocks have been surging recently, may also benefit from the OPEC agreement. Stable crude prices and strong exploration and production earnings will probably create more demand in the drilling business, analysts said.
Drilling and service companies Baker Hughes Inc. (BHI), Schlumberger Ltd. (SLB) and Halliburton Co. (HAL) rose on the NYSE despite a dip in oil futures.
Even at $26.45 a barrel, crude oil prices are still about $10 a barrel higher than a year ago.
“In the long run, this will be positive for both oil prices and stocks,” Nowak said. “Investors will begin to recognize not only that the immediate oil price drop is not a significant decline, but that OPEC is having success in stabilizing the oil market.”
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Slick Movers
Oil stocks, especially those in the oil-services sector, rose Wednesday despite a drop in oil prices. A sampling of oil stocks on the move, ranked by their share-price gain or loss in 2000:
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Ticker Wed. Wed. YTD Company symbol close change change BJ Services BJS $74.44 +$4.06 +78.0% Smith International SII 79.00 +2.13 +60.0 R&B; Falcon FLC 19.94 +1.00 +50.5 Weatherford Intl. WFT 58.50 +2.13 +46.5 Baker Hughes BHI 30.81 +2.00 +46.3 Schlumberger SLB 81.13 +4.25 +44.5 Cooper Cameron CAM 69.00 +2.44 +41.0 Diamond Offshore DO 40.63 +3.25 +32.9 Apache APA 47.75 +3.44 +29.3 Burlington Resources BR 37.63 +2.69 +13.8 Chevron CHV 88.50 +3.63 +2.2 Texaco TX 54.50 +3.44 +0.4 Halliburton HAL 40.25 +2.56 0.0 Exxon Mobil XOM 80.50 +1.50 --0.1 Occidental Petroleum OXY 19.50 +0.38 --9.8 Tidewater TDW 32.25 +2.63 --10.4 S&P; 500 index SPX 1,508.52 +0.79 +2.7
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Source: Bloomberg News
