Oil futures hint at problems for E&Ps, but analyst likes EOG and Noble Energy

Exploration and production companies tend to track crude oil prices, J.P. Morgan's Joseph Allman says, so look no further than the current state of the oil futures market for a reason to be bearish on the sector.

WTI oil futures, which decline every quarter in 2014 and beyond, suggest an off year for the E&P group, Allman writes, noting that the set-up could be similar to 2012, when WTI was down 7% for the year and the S&P was up 13%.

That doesn’t mean that some oil stocks can’t outperform: Allman likes EOG Resources (EOG) and Noble Energy (NBL) among large caps for their “resource expansion and improved operations.”

His least favorite stocks in the sector include Anadarko Petroleum (APC), Devon Energy (DVN) and Chesapeake (CHK).

From other sites
Comments (2)
  • treyminator
    , contributor
    Comments (85) | Send Message
    J.P. Morgan's bearish call on oil appears ill timed given latest oil and fuel reports showing big drop in oil inventories and increased exports of refined products. Further, there is the ever increasing news of various conflicts between groups within Iraq. People down playing the increasing violent conflicts says it is "far away" from production centers (but not far from pipelines). Iraq is not so big that growing violence can be disregarded. Nigeria has growing religious civil war and things are ever more fragile in that large exporting country. Libya has yet to turn on tap in meaningful way. Kashgan project delayed. Of course Iran or other trpubles can erupt in the Middle East at any time. In addition, if the dollar starts to weaken then price of oil will increase since its based on the dollar. Finally, the world economy is steadily demanding more oil and gas every year and the demand can grow stronger if economies start picking up momentum. I suggest the analyst's prediction is on the wrong side of this bet.
    15 Jan 2014, 10:25 PM Reply Like
  • fredgear
    , contributor
    Comment (1) | Send Message
    I absolutely agree. As soon as all heck breaks out in the middle east - DVN with its totality of North American assets will be the one to own.
    16 Jan 2014, 03:35 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs