MW: Asian oil shares rally as crude climbs past $71
TOKYO (MarketWatch) -- Shares of major Asian oil companies climbed Wednesday as weakness in the U.S. dollar and some bets for a decline in U.S. petroleum supplies sent crude prices to a fresh seven-month high above $71 a barrel.
But analysts say caution is in order, as uncertainty surrounds the outlook for the dollar and the weekly supply data from the U.S. Energy Information Administration, due out later Wednesday.
A large part of oil's price gain is due to the weaker dollar, and "if the dollar keeps dropping, it will likely keep rising," said Kevin Kerr, president at Kerr Trading International. "No matter what, right now that is a huge driver for commodities in either direction, especially energy."
But "there is still plenty of on-hand supply of crude, so I am a bit surprised by oil over $70," he said.
July for crude delivery closed at $70.01 a barrel in New York on Tuesday, the highest level for a front-month contract since early November of last year.
It then moved higher on electronic Globex trade during Asian hours, rising as high as $71.10 by late Wednesday afternoon in Tokyo.
Against that backdrop, most Asian oil companies chalked up sizeable gains. In Sydney, shares of Woodside Petroleum (AU:WPL 42.78, +0.61, +1.45%) added 1.5% by the close, Oil Search Ltd. (AU:OSH 5.89, +0.27, +4.80%) climbed 4.8%, and Santos Ltd. (AU:STO 15.62, +0.56, +3.72%) gained 3.7%.
In Tokyo, Inpex Corp. (JP:1605 805,000, -21,000, -2.54%) climbed 3.5%, and Nippon Oil (JP:5001 593.00, -4.00, -0.67%) tacked on 2.4%.
And in Hong Kong, Cnooc Ltd. shares (HK:883 10.70, +0.16, +1.52%) (CEO 138.00, -1.86, -1.33%) rose 1.1%, and PetroChina Co. (PCCYF 1.14, -0.06, -5.00%) (HK:857 9.33, +0.32, +3.55%) advanced by 3.2%. Oil refining company China Petroleum & Chemical Corp., better known as Sinopec (HK:386 5.69, +0.03, +0.53%) , saw its stock add 0.4%.
The moves came amid broad Asian market strength, fed by gains in resource stocks. Japan's Nikkei 225 Average rose 2.1%, Australia's S&P.ASX 200 added 2.3%, and South Korea's Kospi climbed 3.1%. Hong Kong's Hang Seng Index rose 3.4%, and the Hang Seng China Enterprises Index gained 4.3%.
Train of thought
Traders often buy oil stocks as a commodity play, betting that if the company has a lot of oil in the ground and crude prices rise, then revenue will rise as well, noted Charles Perry, president of energy-consulting firm Perry Management.
But that line of reasoning usually just applies to companies which exclusively produce oil, he said.
"For major integrated oil companies, they have so many different income streams that what they sell their produced oil for is only a small part of their total income."
