Buy Oil Services Companies, Shun Oil Producers, Fortis Says

By Hanny Wan

Sept. 3 (Bloomberg) -- Investors should buy oil services companies such as rig builders and shun oil producers given recent pullbacks in crude prices, Fortis Investments said.

``You're still going to see people needing to find and extract oil so the oil services companies' services are going to be in demand regardless of the oil price,'' Christian Goldsmith, Hong Kong-based international investment specialist at Fortis, said in an interview. He declined to name specific stocks.

Crude oil futures plunged 5 percent to $109.71 a barrel in New York yesterday, after touching $105.46, the lowest since April 4. Oil is down 26 percent from its July record.

China Oilfield Services Ltd., a unit of the nation's third- largest oil producer, last week said first-half profit rose 40 percent after energy companies increased exploration spending. The stock has plunged 47 percent this year, more than double the 19 percent slide for parent Cnooc Ltd.

``We really don't see a great deal of reason to invest in, say the large oil majors, which to a certain extent would be seen as sectors under attack,'' Goldsmith said.

The Reuters/Jefferies CRB Index of commodities slumped the most since March 19, led by energy prices, as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Commodities also slumped after the U.S. dollar jumped to the highest since October against six major currencies, eroding the appeal of raw materials priced in the U.S. currency.

Still, oil and commodities prices will rebound ``in the long run'' due to factors including rising demand from China, the continued U.S. hurricane season and increasing geopolitical tensions, Goldsmith said.

``All these uncertainties would mean that the oil price could still see further upward pressure, but not to the level we've seen'' of more than $150 a barrel, he said. ``We do still think that for commodities, there is a long-term structural bull story.

``We would expect commodity prices, over the long term, to remain relatively high,'' he added.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net.