By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) -- Energy stocks rose with the broad market on Thursday, as BP PLC rebounded from its lowest levels in 14 years.
Setting a bullish tone, the Dow Jones Industrial Average (DJIA 10,143, +243.54, +2.46%) rose 170 points, or 1.7%. DJIA components Exxon Mobil (XOM 61.88, +1.85, +3.08%) and Chevron (CVX 73.65, +2.86, +4.04%) rose 2.4% and 3.1% respectively.
A larger-than-expected drop in crude oil inventories in the previous session also helped propel energy stocks higher.
Among the energy sector benchmarks, the NYSE Arca Oil Index (XOI 923.62, +39.22, +4.44%) rose 3.3% to 168. The NYSE Arca Natural Gas Index (XNG 520.04, +19.44, +3.88%) rose 2.9% to 515. The Philadelphia Oil Service Index (OSX 169.65, +7.03, +4.32%) advanced 3.4% to 169.
BP PLC (BP 32.23, +3.03, +10.38%) rose 9.6% to $32. While S&P Equity Research cut its rating on the oil major to hold from buy, analyst said the sharp fall in BP's shares has been "overdone" and that it's trading well below its true worth.
Analysts also cited, "the uncertainties arising from the Gulf of Mexico rig accident, the political sensitivities regarding BP keeping its 2010 dividend, the costs of the clean-up, upcoming civil charges and potential U.S. government resolutions."
J.P. Morgan shuffled ratings on three oil service names to align with its investment thesis in favor of large cap oil service firms and away from offshore drillers, which currently face a U.S. moratorium on deep water exploration in the Gulf of Mexico.
J.P. Morgan upgraded Baker Hughes (BHI 41.42, +3.07, +8.01%) to overweight and lifted its rating on Weatherford International (WFT 13.36, +0.59, +4.62%) to neutral.
J.P. Morgan cut Ensco PLC (ESV 38.00, +1.39, +3.80%) to neutral and reiterated its neutral rating on Transocean (RIG 44.70, +2.12, +4.98%) .
Analysts said Transocean, the owner of the Deepwater Horizon rig that blew up in April 20, "is a moving target with too much emotion driving the share price" after Wednesday's 8% drop in the stock.
Baker Hughes shares jumped nearly 8%, while Weatherford stock rose 4%. Ensco PLC rose 3% and Transocean jumped 4.8%.
