NEW YORK (MarketWatch) - Energy stocks regained their footing Thursday in early action, only to fall back to mixed trading after a big slide in the previous session as investors look toward the latest weekly petroleum inventory data, lower retail gasoline prices, and a fresh production cut from OPEC.
The largest reduction in global demand growth forecasts in 12 years, as well as the fattest weekly jobless claim figures since 2001 also loomed in the market.
Against this backdrop, the Amex Oil Index rose 0.2% to 849. In the previous session, the gauge of major oil producers fell a sharp 7.5%, underperforming even the 411-point drop in the Dow Jones Industrial Average.
The Amex Natural Gas Index traded fractionally lower at 380. On Wednesday, the index fell 7.6%.
The Philadelphia Oil Service Index rose 2.5% to 132, reversing some of its big 8% loss in the previous session.
Meanwhile, crude prices recovered slightly, rising 45 cents to $56.61, still the lowest level in nearly two years. See Futures Movers.
"Concerns over the global slowdown and significantly reduced demand are the primary factors affecting crude, but we may now begin to see a similar overreaction, similar to when crude traded to record highs earlier this summer," said Brian Niemiec of Susquehanna Financial.
And as President-elect Barack Obama gets ready to take office next year, Big Oil could be the loser and alternative energy the winner as the U.S. looks to grow green collar jobs, but the big drop in oil prices and less pain at the pump may curb talk of a windfall profits tax. See full story.
Investors will keep a close eye on the latest inventory data, which comes a day later than usual because of Veterans Day on Monday. On average, industry analysts polled by Platts expect to see increases of 1.1 million barrels for crude, 1 million barrels for distillates and 850,000 barrels for motor gasoline.
First-time filings for state unemployment benefits hit their highest level since September 2001 in the latest week, rising to 516,000 in another sign of a struggling U.S. labor market, the Labor Department reported. See full story.
OPEC may move to cut production again at an expected meeting in Egypt on Nov. 29. Mike Wittner, analyst at Societe Generale, told Dow Jones Newswires that he's expecting a quota cut of one million barrels a day.
Meanwhile, the average retail cost in the U.S. for a gallon of unleaded gasoline fell 2 cents to $2.18, according to the AAA Daily Fuel Gauge Report. A month ago, gasoline sold for $3.16 a gallon. A year ago, it sold for $3.11 a gallon. The highest recorded average price of $4.11 a gallon took place on July 17.
The International Energy Agency said it expects global demand to grow by 120,000 barrels a day to 86.2 million barrels a day in 2008, which is down 330,000 barrels from its previous forecast. The reduction marks the biggest estimate cut by the IEA in 12 years.
Slowing oil sector investment in 2009 sows the seeds of a sharp tightening in market fundamentals if major projects are delayed, the impact being felt three to five years hence after economic recovery regains a foothold," the agency said.
Among energy stocks in the spotlight, Petrobras ) has within the past year announced a stunning string of oil and gas discoveries that could alter international markets and prove a boon for both the national oil company and international operators that are involved in the action.
And in a rare, heartening bit of news for the world's largest oil companies -- which are struggling to replace production as many nations shut them out of their fields -- Big Oil is welcome to join the party. Petrobras fell 2% to $21.45.
Separately, Chevron said it kicked off crude oil production from its Blind Faith Field in the deepwater Gulf of Mexico. Shares rose 1% to $67.96.
