Stay Long On Energy

By | July 6, 2007

Stay Long On Energy

To bring the forecasts back to an easy-to-think-about set of numbers, we have netted the up and down potentials, and in the second picture, plotted them against the latest settlements. These forecasts by major players at the crude oil table suggest little lasting price weakness, and a general level prevailing above $70 over the remainder of the year. Beyond that time it may get very rugged for traders that are short crude, or perhaps those short oil stocks in general, all other things being equal.

Among the big oil producers, the Chinese CNOOC (nyse: CEO – news – people ), Canadian Natural Resources (nyse: CNQ – news – people ) and Suncor Energy (nyse: SU – news – people ) all combine historical odds and payoffs that exceed our hurdle of a net +5% prospect in the coming three months. Most of the other majors have had significant price increases, but many have not seen their appraisals by market-makers rise commensurately. Exxon Mobil (nyse: XOM – news – people ) looks quite fully priced.

The oil services and transport section provides five names meeting our test for prospective returns. They are World Fuel Services (nyse: INT – news – people ), Tenaris (nyse: TS – news – people ), Superior Energy Services (nyse: SPN – news – people ), BJ Services (nyse: BJS – news – people ) and Ship Finance International Limited (nyse: SFL – news – people ).

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