By Jim Jelter, MarketWatch
SAN FRANCISCO (MarketWatch) -- Oil stocks notched modest gains Friday as crude-oil prices recovered from an overnight slump and reports of a possible merger between two of the biggest names in the oil-field-service sector perked up investor interest in that side of the business.
The Philadelphia Oil Service Sector Index (OSX 205.29, +3.04, +1.50%) rose 1.5% Friday to close at 205.29 points, leaving it with a 4.8% gain for the holiday-shortened four-day week.
Driving the advance was a report in The Wall Street Journal that Schlumberger Ltd. (SLB 63.90, -1.91, -2.90%) is in "advanced discussions" to acquire fellow drilling-services company Smith International Inc. (SII 37.70, +4.35, +13.04%) . Industry analysts say such a deal would likely carry a value of around $9 billion and rely heavily on stock rather than cash.
Smith International shares surged 13% on the report to close at $37.70 while Schlumberger shares fell 2.9% to $63.90.
There was far less investor enthusiasm Friday for oil producers and refiners. The NYSE Arca Oil Index (XOI 1,044, +0.41, +0.04%) rose less than 0.1% to close at 1,042.92 points, leaving it with a 2.9% advance for the week. Only one company in the index, independent refiner Valero Energy Corp. (VLO 17.89, +0.20, +1.13%) , moved more than a percentage point, closing up 1.1% at $17.89 a share.
Crude-oil prices provided some support to the group. March crude-oil futures rose 0.9% to close at $79.81 a barrel on the New York Mercantile Exchange, bouncing back from an overnight low of $77.76. The overnight slump was a reaction to a surge in the strength of the U.S. dollar after the Federal Reserve bumped up discount rates. See Futures Movers.
Meanwhile, the NYSE Arca Natural Gas Index (XNG 545.80, +1.45, +0.27%) rose nearly 0.3% to 545.8 points, ending the week with a 4.2% advance. National Fuel Gas (NFG 50.84, +0.91, +1.82%) was the group's biggest gainer, up 1.8% to close at $50.84.
