By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) -- Energy stocks fell Wednesday on weak economic data as investors looked toward the weekly supply update from the U.S. Department of Energy and despite a bullish take on oil supplies from an industry group.
The NYSE Arca Oil Index (XOI 1,100, -3.46, -0.31%) fell 0.3% to 1,101, pulling back along with the broad equities market.
The NYSE Arca Natural Gas Index (XNG 514.94, -3.15, -0.61%) fell 0.5% to 515.
The Philadelphia Oil Service Index (OSX 200.63, -1.84, -0.91%) dropped 0.8% to 201.
Crude supplies dropped by 4.37 million barrels during the week ended Nov. 13, the American Petroleum Institute said late Tuesday. Analysts polled by Platts expected a rise of 1.2 million barrels.
The Energy Information Administration is scheduled to report its more closely watched inventories data at 10:30 a.m. Eastern.
On the economic data front, U.S. housing starts fell sharply in October while consumer prices rose 0.3%.
Among stocks in the spotlight, Smith International (SII 28.14, +1.28, +4.77%) rose nearly 4% to $27.83.
The oil service firm drew an upgrade from Citi to buy from neutral. Analysts said the stock could be poised for a rebound and added that Smith International may become a takeover target.
"While Smith has been one of the worst-performing oil service stocks in 2009, its poor operating results and its need for new equity capital are reflected in its current share price," said analyst Robin Shoemaker. Analysts said Smith International could be a high value merger and acquisition candidate and that the stock offers an upside to around $25 a share in 2010.
Sunoco (SUN 26.16, -0.12, -0.46%) fell 0.3% to $26.19.
Analyst Jacques Rousseau said the stock has fallen 16% over the past two weeks and reiterated his buy rating.
"We recommend buying Sunoco shares, believing that although refining sector fundamentals remain very weak, there is significant value within the company on a sum-of-the-parts basis, which we estimate equals $48 a share," Rousseau said. "We expect management to continue to 'unlock' the value of the company in 2010 through asset sales and spin-offs."
