Drop in Crude Inventories Sparks Oil Stock Rally
Marathon Oil Corporation (MRO), T-3 Energy Services, Inc. (TTES), and Stone Energy Corporation (SGY) were some notable stocks in the energy industry as lower-than-expected crude inventories sent energy stocks higher.
Crude oil inventories fell by 4 million barrels and gasoline stockpiles dropped 300,000 barrels for the week ended October 30th, according to the Energy Information Administration. The news sparked a rally in crude oil to over $80 a barrel, as well as a jump in gasoline prices, as many analysts had been expecting a modest gain in inventories for the week.
Crude oil prices have fallen from a high of $82 per barrel last month as investors remained concerned about the demand picture. Meanwhile, some analysts are predicting that oil could fall further if a U.S. unemployment continues to fall with numbers expected on Friday. Indeed, many believe that oil has only increased due to speculation and could see $75 in the near term.
Sector Highlights
Among the biggest gainers in the sector was T-3 Energy Services, Inc. [[TTES]]. The company reported third quarter net income of $4.1 million, or $0.32 per share, compared to $4.9 million, or $0.38 per share a year ago. While the current quarter reflected benefits from an insurance claim, investors remain confident in the company’s forecasts and backlog going forward.
Meanwhile, Stone Energy Corporation [[SGY]] also impressed investors with its third quarter results. The company earned $51.1 million, or $1.06 per share, on operating revenues of $202.7 million. Notably, the company also strengthened their balance sheet by reducing debt by $200 million and building up their cash position to improve shareholder equity.
Finally, Marathon Oil Corporation [[MRO]] took a hit to its earnings earlier this week on lower refining income, but moved higher today after announcing that it would begin drilling in Pasangkau, Indonesia during the first quarter. The company will use a ship from Transocean [[RIG]] to drill two wells for 2010 and a third in 2011, according to industry sources.
The Takeaway…
- Oil prices have been rallying due to increased speculation related to India’s gold purchases, but many analysts believe that it could head down without a better demand picture.
- Many oil companies have been taking advantage of the improving prices over the past few months, however, and are reporting solid improvements in earnings.
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