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More speculation over Exxon bid for all or part of Royal Dutch Shell

SATURDAY, JANUARY 24, 2009

BARRON’S COVER

Oil’s a Buy

By DIMITRA DEFOTIS

Big oil stocks are likely to creep back up, along with the price of energy. But investors should stick with the best — such as ExxonMobil. (Video)

IN A VERY UGLY 2008 FOR STOCKS, big-oil shares provided one relatively beautiful respite, rising smartly through midyear before losing ground as petroleum prices slid from the astounding peak around $147 a barrel that they hit in July.

Now, with crude more than $100 below that level, shares of the integrated oil giants — those that do everything from exploring to producing to refining and distributing — remain in a slump. Some now look tempting for long-term investors, but there’s no need to rush. Big oil stocks could get even more tempting in coming weeks as the companies report earnings, issue subdued guidance for 2009 results and reduce the value of their reserves to reflect the latest realities of crude pricing.

The U.S. Energy Information Administration expects oil to average about $43 a barrel in 2009, while some Wall Street energy bulls consider $60 more likely. If either forecast is right, petro stocks will benefit later this year. If on the other hand, crude slides below its current level, as some Street bears expect, the shares could stumble further. Of course, few oil-price prognosticators have covered themselves in glory over the past year, and there’s no reason to assume that their forecasting skills have improved. Especially since just where the price will go has much to do with another great unknown: how long the global recession lasts and how strong the subsequent recovery will be.

EXTENSIVE SOURCE ARTICLE WITH WORKING VIDEO (RECOMMENDED)


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