Zacks Industry Outlook Highlights: Chevron, ExxonMobil, Total SA, CNOOC and PetroChina Company Limited

CHICAGO, May 19, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Oil & Gas Industry, including Chevron Corp. (NYSE: CVX), ExxonMobil Corp. (NYSE: XOM), Total SA (NYSE: TOT), CNOOC Ltd. (NYSE: CEO) and PetroChina Company Limited (NYSE: PTR)

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A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/53519/Oil+%26amp%3B+Gas+Industry+Outlook+-+May+2011

Crude Oil

The improving economic scene -- both here in the U.S. as well as worldwide -- and the continued unrest in producing countries had been the main driver of the oil rally that saw the commodity zoom past the $110 per barrel level last month.

However, apprehensions about soaring U.S. crude stocks -- currently at their highest level in two years -- and worries that China's tightening monetary policy in response to inflationary pressures may bring down its growth momentum, have been weighing on investor sentiment, weakening oil prices to less than $100 a barrel.

But far too many factors weigh on oil prices -- from OPEC decisions and geostrategic tensions to the value of the U.S. dollar and seasonal variables -- to definitively size up each one of them for their respective impact on prices.

As per the latest release by the Energy Information Administration (EIA), crude supplies are higher than the year-earlier level and are above the upper limit of the average for this time of the year. This has led to demand concerns against a backdrop of persistently slow job growth. At the same time, global oil consumption is expected to grow at a healthy rate this year, buoyed by the continued demand strength in the major emerging market economies.

As such, crude oil's near-term fundamentals remain patchy, to say the least. The long-term outlook for oil, however, remains favorable given the commodity's constrained supply picture.

Natural Gas

Though the favorable weather this winter and production freeze-offs in January and February erased the hefty surplus over last year's inventory level and the five-year average, the specter of a continued glut in domestic gas supplies still exists, with storage levels remaining close to their five-year average.

A supply glut has pressured natural gas futures for much of 2010, as production from dense rock formations (shale) -- through novel techniques of horizontal drilling and hydraulic fracturing -- remain robust, thereby overwhelming demand.

OPPORTUNITIES

In this current turbulent market environment, we advocate the relatively low-risk energy conglomerate business structures of the large-cap integrateds, with their fortress-like balance sheets, ample free cash flows even in a low oil price environment and growing dividends. Our preferred name in this group remains Chevron Corp. (NYSE: CVX), ExxonMobil Corp. (NYSE: XOM) and Total SA (NYSE: TOT).

The current oil price environment should also benefit producers, particularly those international players having attractive growth opportunities in their home markets. Two such standout names are China's CNOOC Ltd. (NYSE: CEO) and PetroChina Company Limited (NYSE: PTR), both of which remain well-placed to benefit from the country's growing appetite for energy and the turnaround in commodity prices.

CNOOC enjoys a monopoly on exploration activities in China's very prospective offshore region in addition to having a growing presence in the country's natural gas and LNG infrastructure. On the other hand, PetroChina -- one of two Chinese integrated oil companies -- is poised to capitalize from the country's impressive economic growth that has significantly increased its demand for oil, natural gas and chemicals.

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