Now that oil prices have joined the party, I thought I’d share some of Fadel Gheit’s thoughts on the energy sector. Gheit covers oil for Oppenheimer and was ranked #3 on the list of Forbes‘ Best Brokerage Analysts for 2009.
He spoke to The Energy Report last week about the energy markets:
On the discrepancy between oil and gas prices:
Because oil is a global commodity; gas is a regional commodity. You can have a huge discrepancy in gas prices from country to country, from continent to continent, because of a lack of adequate transportation—the means of shipping to take gas from where it’s found in abundance to where it’s needed. For example, gas in the Middle East has no value because there is no local market for it.
On the influence of financial speculators on commodity pricing:
For all practical purposes, the reason I think oil prices will remain inflated is because I truly believe the financial players—who’ve already tasted blood and are not going to let go because this has now become the single-largest source of trading revenue—are betting on commodity futures. First of all, the derivative, which destroyed the financial market, was basically like a chain letter. You send it to your neighbor and so forth, nobody can really catch it anymore. It’s like the flu. It just will become contagious throughout the world. If you look at the income statements of the major financial institutions, they don’t break up their revenue from oil trading. But it’s a multi-billion dollar business for the large players like Goldman Sachs and Morgan Stanley. And they absolutely refuse to and do not disclose it because it is more lucrative than bank robbery.
And how about some of his picks:
The large cap E&P are
- Anadarko Petroleum Corporation (NYSE: APC)
- Apache Corporation (NYSE: APA)
- Devon Energy Corporation (NYSE: DVN),
- EOG Resources, Inc. (NYSE:EOG),
- Noble Energy, Inc. (NYSE:NBL)
- Occidental Petroleum Corporation (NYSE:OXY)
- XTO Energy, Inc. (NYSE: XTO)
The smaller names—actually, I don’t have many of them and that’s where we’re going to expand—are
- Cabot Oil & Gas (NYSE: COG),
- Comstock Resources, Inc. (NYSE: CRK)
- Pioneer Natural Resources (NYSE:PXD)
This was a great interview, worth a read if you’re trading this sector.
Full Disclosure: I may or may not be long or short any of the above mentioned stocks for either personal or customer accounts. My mention of any publicly traded entity does not consitute an endorsement or recommendation. Nothing on this site should ever be construed as research, advice or an invitation to buy or sell any securities, see my Terms & Conditions page for a full disclaimer.