Gains in Asian energy shares look ready to stick

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By Myra P. Saefong, MarketWatch

TOKYO (MarketWatch) -- Oil and natural-gas shares rallied Monday afternoon in Asia, and the gains looked ready to stick as the recent climb in crude-oil prices past $82 a barrel helped highlight the sector's potential.

Energy shares, particularly those in China and Japan, may benefit in the longer term from changes to energy pricing policies, as well as from an expected rise in exploration spending and forecasts for further strength in oil prices, analysts said.

Oil prices are likely to fluctuate between $70 and $90 during most of 2010, averaging $80 per barrel versus $62 in 2009, "ensuring the resumption of earnings growth" in the Chinese oil-and-gas sector, analysts at Mirae Asset said in a recent note to clients.

Crude-oil futures for April delivery finished Friday at $81.50 a barrel in New York, scoring a gain of more than 2% for the week following better-than-expected U.S. jobs data and positive comments from Chinese officials about economic growth. See Friday's Futures Movers.

April crude tapped a high of $82.12 briefly on Friday, the highest intraday level for a most-active futures contract since Jan. 11, according to FactSet Research. Prices extended their gains to trade as high as $82.08 on Globex by Monday afternoon in Asia.

Energy shares in Asia moved broadly higher on the gains. In Hong Kong, shares of Cnooc Ltd. /quotes/comstock/22h!e:883 (HK:883 13.14, 0.00, 0.00%) advanced 2.4%, China Petroleum & Chemical Corp. /quotes/comstock/22h!e:386 (HK:386 6.25, 0.00, 0.00%) /quotes/comstock/11i!snpmf (SNPMF 0.81, +0.05, +5.93%) rose 1.8% and China Oilfield Services Ltd. /quotes/comstock/22h!e:2883 (HK:2883 10.14, 0.00, 0.00%) /quotes/comstock/11i!cholf (CHOLF 1.27, +0.02, +1.60%) tacked on 4.5%.

Shares of PetroChina Co. /quotes/comstock/22h!e:857 (HK:857 8.88, 0.00, 0.00%) /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 114.00, -0.44, -0.38%) were 2.9% higher on news that the company, China's largest-listed oil company by capacity, and Royal Dutch Shell PLC /quotes/comstock/13*!rds.a/quotes/nls/rds.a (RDS.A 55.98, +0.07, +0.13%) are offering to pay about 3.26 billion Australian dollars ($2.97 billion) for Australian energy producer Arrow Energy Ltd. See story on PetroChina, Shell bid.

In Tokyo, Inpex Corp. (JP:1605 423,000, -13,000, -2.98%) was up 0.9%, Nippon Oil Corp. (JP:5001 471.00, +6.00, +1.29%) /quotes/comstock/11i!npoif (NPOIF 5.70, +0.57, +11.21%) rose 1.3% and Japan Petroleum Exploration Co. (JP:1662 3,455, -70.00, -1.99%) /quotes/comstock/11i!jptxf (JPTXF 0.00, 0.00, 0.00%) , also known as Japex, added 1.5%. In Sydney, Santos Ltd. /quotes/comstock/22x!e:sto (AU:STO 13.32, -0.25, -1.84%) /quotes/comstock/11i!stosf (STOSF 12.20, -0.35, -2.79%) added 3.7%, and Oil Search Ltd. /quotes/comstock/22x!e:osh (AU:OSH 5.82, -0.06, -1.02%) /quotes/comstock/11i!oishf (OISHF 5.00, +0.05, +1.01%) rallied 6.1%.

Advances in the oil shares coincided with broader regional gains, with the Nikkei 225 Average trading 1.7% higher Monday afternoon in Tokyo, Hong Kong's Hang Seng Index up 2%, South Korea's Kospi up 1.2% and the S&P/ASX 200 gaining 0.9% in Sydney.

Betting on oil's value

Analysts were upbeat on the outlook for Asia's energy market, given forecasts for higher oil prices.

"Crude-oil futures should continue to provide support to oil shares," said Darin Newsom, a senior analyst at Telvent DTN.

Crude prices may want to challenge the January high of $83.95, with support coming from the investment side of the market, he said.

"If the spot-month crude contract takes out the January high, the seasonal index would indicate an extended rally to near $96 through this summer," Newsom said.

However, "the underlying supply and demand [situation] doesn't seem to support such a rally," he said.

Still, analysts at Yuanta Research have a "stable" outlook for prices for 2010 to 2011.

"We believe oil prices will inch upwards and are unlikely to experience severe fluctuations over the next two years," they said in a note to clients on the petrochemical sector.