JPMorgan jumps aboad the “tight supply / huge demand” explanation for soaring oil prices and says there’s still upside for the stocks:
We find it interesting that the main reaction to Thurs and Fri’s move in crude has been to raise the fervor over speculation to witch-hunt level. (Never mind the inconsistency of simultaneously blaming speculators for high absolute prices—and for being caught short the market during last week’s reversal.) An important bit of news that was overlooked last week was the Varanus Island gas plant explosion—which knocked out one-third of the western Australia’s gas supply and sent global distillate prices soaring (US heating oil was up almost $13.bbl despite a strong build in inventory).
JPM remains bullish on a variety of energy-related stocks, including oil services and majors:
- Halliburton (HAL)
- National-Oilwell Varco (NOV)
- Smith International (SII)
- Schlumberger Limited (SLB)
- Nabors Industries Ltd. (NBR)
- Helmerich & Payne (HP)
- Hess (HES); also added by Goldman Sachs to their Conviction Buy List
- Occidental Petroleum (OXY)
- Marathon Oil (MRO)
What’s missing from that list? Super-majors and refiners; JP says to stay away.