Opec's decision to cut production is having little impact on an already declining oil price, accordi...
Opec's decision to cut production is having little impact on an already declining oil price, according to Aberdeen Asset Management.
Rupert Howard, North American fund manager with the group, believes the US economy will not be affected by Opec's decision to reduce output by a million barrels a day.
He says the winter season in America saw the price of both oil and gas rise a great deal, which had a major impact on consumer spending. Now though, Howard says the seasonal slowdown in demand has brought the price back down to roughly where it was 12 months ago.
Howard says Opec is trying to achieve a balancing effect of keeping the price of oil relatively high without damaging global growth and the worldwide demand for oil in the first place.
The Aberdeen America fund is neutral on the energy sector, according to Howard. In particular, he likes Texaco and Cherron, which he says are due to merge in two or three months and will therefore probably be able to cut costs.
Howard is positive on oil servicing companies, which own and lease out oil rigs. He says these businesses are situated in a powerful uptrend; because of the recent high oil price, these companies have got more money to put into the exploration and development of new oil fields. Howard says he is also keen on Transocean Sedco Forex, one of the biggest US deep-water drilling companies.
Grant Wilson, a director with the North American team at Martin Currie, says it is not worth taking a bet one way or the other on the price of oil or the outlook for energy stocks.
He says that although the Opec production cut sounds like positive news, the sector will not perform well because of the global slowdown.
Energy demand has already slumped as the slowdown hits Japan, Asia and the US, and this will continue to worsen, Wilson predicts. He says greater oil price easing from Opec is therefore more likely than a tightening, with less economic activity and the approach of warmer spring weather.
The Martin Currie North America fund is neutral energy against the Morgan Stanley North America index, with a 5% weighting in the sector. Wilson holds Exxon, the largest company, in order to maintain the fund's neutral position.
The fund also holds Conico and is therefore slightly tilted towards refining and marketing. Wilson says this is because prices at the pump tend to fall less rapidly than wholesale prices, which means refineries tend to do better than distributors.
Investment manager at Britannic Asset Management Douglas Wright is similarly wary of making oil price predictions, although he is slightly overweight energy at present.
He says: "We are cautious on the outlook for the US market and see oil and energy stocks in general as one of the few sectors where we can be relatively confident that companies will not disappoint. With so many traditionally defensive companies announcing profits warnings, oil companies are one area in which we see potential for more positive earnings surprises, at least in the first quarter of this year."
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