Cnooc to Beat PetroChina, Sinopec as Oil Rallies: Chart of Day

By Robert Tuttle

Oct. 23 (Bloomberg) -- Cnooc Ltd. will outperform China Petroleum & Chemical Corp. and PetroChina Co. by as much as 30 percent as oil rises above $80 a barrel, Morgan Stanley said.

Sinopec, as China Petroleum is known, and PetroChina, the nation’s biggest refiners, can’t increase prices until the government allows an increase, said Viktor Hjort, senior equity derivatives analyst at Morgan Stanley in Hong Kong. As oil gains to $80 and above, the government will be less willing to raise fuel prices for fear of upsetting consumers. Cnooc drills oil and has almost no involvement in the domestic fuel market.

The CHART OF THE DAY shows Cnooc shares have gained 85 percent in Hong Kong as oil more than doubled from its year-to- date low of $32.70 in January. That beat a 69 percent increase for Sinopec, and PetroChina, 55 percent higher. The trend will intensify as oil passes $80 a barrel, Hjort said.

“The higher the price goes, the lower the probability that the political process will play catch up,” Hjort said. “At some point, political considerations, especially for the young consumers, start to play a role.”

Oil, which has gained 81 percent this year, rose to $82 on the New York Mercantile Exchange this week, the highest price in a year. Morgan Stanley forecasts oil rising above $100 a barrel by 2012.

Traders can profit through purchasing Cnooc call options, bets that prices will rise, financing the purchases by selling Sinopec and PetroChina calls, Hjort said.

(To save a copy of the chart, click here.)

To contact the reporter on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net