Goldman Sachs Said Buy the Dip in Oil Stocks on Disconnect from Brent (XLE)
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Rating Summary:
0 Buy, 0 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Goldman Sachs said oil stocks are trading "inexpensively" relative to Brent prices and forecasts.
The firm notes that since the correction in May, Energy Select Sector SPDR (NYSE: XLE) is trading in sympathy with WTI crude, which is $19/bbl below Brent. "We believe Brent oil is overwhelmingly the better benchmark for energy equities, and hence view the disconnect as an opportunity to add to our favorites on the dip."
Despite the Brent-WTI spread widening to $19 barrel, from a range of $12-$15/bbl, Mid-Continent refiners have not kept pace, the firm notes.
Goldman is telling clients to buy the dip in their top picks in the sector based on ther favorite 2nd-half 2011 themes:
1. Preference for visible production and resource growth. Favorites = Cenovus Energy Inc. (NYSE: CVE), Occidental Petroleum Corporation (NYSE: OXY), OGX, Suncor Energy Inc. (NYSE: SU)
2. Leverage to our bullish crude oil view: Favorites = Cenovus Energy Inc. (NYSE: CVE), uncor Energy Inc. (NYSE: SU).
3. beta "barbell" recommended: Exxon Mobil Corporation (NYSE: XOM), Occidental Petroleum Corporation (NYSE: OXY)
4. sum-of-the-parts realization stories: CVR Energy, Inc. (NYSE: CVI), Marathon Oil Corporation (NYSE: MRO)
5. exposure to Mid-Continent refining and wide WTI-Brent crude oil spreads: CVR Energy, Inc. (NYSE: CVI), Marathon Oil Corporation (NYSE: MRO)
The firm notes that since the correction in May, Energy Select Sector SPDR (NYSE: XLE) is trading in sympathy with WTI crude, which is $19/bbl below Brent. "We believe Brent oil is overwhelmingly the better benchmark for energy equities, and hence view the disconnect as an opportunity to add to our favorites on the dip."
Despite the Brent-WTI spread widening to $19 barrel, from a range of $12-$15/bbl, Mid-Continent refiners have not kept pace, the firm notes.
Goldman is telling clients to buy the dip in their top picks in the sector based on ther favorite 2nd-half 2011 themes:
1. Preference for visible production and resource growth. Favorites = Cenovus Energy Inc. (NYSE: CVE), Occidental Petroleum Corporation (NYSE: OXY), OGX, Suncor Energy Inc. (NYSE: SU)
2. Leverage to our bullish crude oil view: Favorites = Cenovus Energy Inc. (NYSE: CVE), uncor Energy Inc. (NYSE: SU).
3. beta "barbell" recommended: Exxon Mobil Corporation (NYSE: XOM), Occidental Petroleum Corporation (NYSE: OXY)
4. sum-of-the-parts realization stories: CVR Energy, Inc. (NYSE: CVI), Marathon Oil Corporation (NYSE: MRO)
5. exposure to Mid-Continent refining and wide WTI-Brent crude oil spreads: CVR Energy, Inc. (NYSE: CVI), Marathon Oil Corporation (NYSE: MRO)
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