MW: Energy stocks turn around and rise with broad market
Surprise drop in gasoline inventories stokes Valero shares
NEW YORK (MarketWatch) -- Energy stocks reversed course and moved up with the broad market on Wednesday as investors eyed a surprise drop in gasoline inventories and oil prices rose.
U.S. petroleum supplies rose 1.3 million barrels in the past week, according to fresh data from the Energy Information Administration. Gasoline stocks fell by 2.3 million barrels.
Analysts polled by Platts expected a buildup in commercial-crude supplies of 2.2 million barrels and a decline of 2.3 million barrels in gasoline stockpiles.
In energy trading, crude futures rose 20 cents to $79.32. after moving lower earlier in the day. See Futures Movers.
The NYSE Arca Oil Index (XOI 1,122, +13.01, +1.17%) rose 1.4% to 1,125, powered by refining giant Valero (VLO 20.62, +0.51, +2.54%) , which rose 2.8% to $20.69.
The NYSE Arca Natural Gas Index (XNG 544.82, +1.50, +0.28%) rose 0.5% to $65.70.
The Philadelphia Oil Service Index (OSX 209.72, +1.78, +0.86%) added 1.2% to 210.
Among energy stocks in the spotlight, Nabors Industries (NBR 23.14, +0.73, +3.26%) jumped 4% to $23.32.
Late Tuesday, the company reported third-quarter net income of $29.5 million, or 10 cents a share, down from $194 million, or 67 cents, earned in the same period a year ago. Adjusted to exclude write-downs and one-time items, the company had earnings from ongoing operations of 15 cents a share for the latest quarter.
Analysts polled by FactSet Research had forecast a profit of 17 cents a share on $829 million in revenue.
"This was a messy quarter for Nabors, but it might not be so bad for the domestic land drillers," analysts at Pritchard Capital said in a note to clients. "The results were disappointing overall, but the one drilling segment in which Nabors did better than expected was in the U.S. Lower 48."
El Paso dips on Citi downgrade
El Paso (EP 11.08, -0.10, -0.89%) shares fell 1.2% to $11.05 after Citi downgraded the natural gas producer to hold from buy, with a price target of $12 a share. Citi sees the company's production falling by about 2% in 2010 on declines in established fields, partially offset by gains in the Haynesville. Citi said its preferred energy name in the commodity-focused group is Williams (WMB 20.03, +0.17, +0.86%) .
Royal Dutch Shell leases in spotlight
Also Tuesday, Interior Secretary Ken Salazar said the government will take a closer look at six leases with favorable royalty rates granted to Royal Dutch Shell (RDS.A 63.23, +0.89, +1.43%) and others just five days before President George W. Bush left office.
The deals to develop oil shale on public lands in Utah and Colorado included the locking-in of a potentially lucrative 5% royalty rate, well below the double-digit percentage charged on other federal lands. Shell holds three of the six leases that were granted.
Former Interior Secretary Gale Norton now works at Shell and investigators will probe whether the lease deals may have been illegal. The probe may shape efforts by the government to open up the West for new oil-shale development.
