An expected near-term softening of crude prices prompted one analyst
Monday to downgrade the oil-heavy shares of Hess and Occidental Petroleum.
In a report, Friedman, Billings, Ramsey analyst Eitan Bernstein raised
his fourth-quarter crude price estimate from $65/barrel to $73/b, but his
forecast was well below the current front-month NYMEX crude value of around
$80/b. He predicted prices would average $60/b for 2008-2010.
After last week's highs of nearly $84/b, benchmark NYMEX sweet crude oil
was down by more than $2 at $79.05/b in morning trade amid ample inventories
and the dollar strengthening against the euro.
Bernstein downgraded Hess to "market perform" from outperform and
Occidental to "underperform" from "market perform," citing his "cautious
stance" on "oil-levered names."
Hess shares were down 36 cents at $65.71/share in early trading, while
Occidental shares were down 93 cents at $65.48/share.
"While we subscribe to the notion that increasing global crude oil
consumption should support prices above longer-term historical averages, we
believe that the commodity is poised for an [approximately] 10% near-term
pullback as crude oil demand growth expectations decline," Bernstein said.
He added: "It is only prudent to recall that late last year crude oil
prices fell by 20% (from $64/b to $50/b) and the integrated oil stocks
declined 10% on average, as typical winter conditions failed to materialize."
--Leslie Moore Mira, leslie_moore@platts.com
--Funda Saygin, funda_saygin@platts.com