Plenty of equity-based exchange traded funds are benefiting from rebounding oil prices, but few are doing so in fashion on par with the Market Vectors Oil Service ETF (NYSEArca: OIH). OIH, the largest ETF dedicated to oil services stocks, is higher by nearly 12% over the past month and some market observers do not see the ETF’s run slowing down anytime soon.
With oil prices still low, major oil producers have been aggressively cutting back costs to muddle through the lean times. For instance, Exxon Mobil (NYSE: XOM) has cut its drilling budget to a 10-year low and halted share buybacks after last year’s measures failed to counter a crash in energy prices, reports Joe Carroll for Bloomberg.
Exxon stated it will curb spending on rig leases, floating oil platforms, gas terminals and other projects by 25% this year to $23.2 billion, the lowest spending plan since 2007. The steepening cuts come off a 20% reduction in spending to $31 billion on drilling, floating platforms and gas-export terminals, compared to previous expectations of a 12% cut in spending last year.
Chevron (NYSE: CVX), the second-largest U.S. oil company behind Exxon, announced significant reductions to its 2017 and 2018 capital spending plans, but the rise of oil services ETFs has beaten back that glum capital spending news. In fact some analysts are bullish on some of the names found in ETF’s like OIH.
“A new research note from UBS oilfield services analyst Angie Sedita maintains that the first half of this year could end up being an opportune time for investors with a long-term horizon to buy energy sector stocks. She cautions though that the stocks could remain somewhat range-bound for a few quarters to come,” reports Lee Jackson for 24/7 Wall Street.
The UBS analyst has buying ratings on Baker Hughes (NYSE: BHI), Halliburton (NYSE: HAL), Schlumberger (NYSE: SLB) and Weatherford International (NYSE: WFT). Those stocks combine for over 43% of OIH’s weight with Schlumberger and Halliburton combining for a third of the ETF’s weight.
“OIH just closed above 40-WMA for first time since bearish break in Sept 2014; 3 prior rallies proved counter-trend and ETF failed to reclaim key long-term MA,” reports Reuters. “Additionally, weekly MACD bullish and pressing highest levels since late 2014; study nearing zero-line inflection. Thus, OIH appears focused on resistance in $32.78/$34.80 area, and eventually 50 pct Fibo retracement of 2014/2016 bear can call for return to $39.23/$39.79.”
[related_stories]Market Vectors Oil Service ETF
