Updated from 2:08 p.m. ESTEnergy prices rebounded from their steep losses earlier Tuesday as warm weather worries subsided and bargain hunters entered the market. Contracts for February delivery of light sweet crude ended down 45 cents at $55.64 a barrel on the New York Mercantile Exchange. At its worst point of the day, oil was lower by more than $2 before turning around. Other energy futures completely erased their losses and went positive. Gasoline was fractionally higher at $1.47 a gallon, and natural gas was at $6.63 per million British thermal units, up 25 cents. The PowerShares DB Energy Fund ( DBE) advanced 0.6%, but the PowerShares DB Oil Fund ( DBO) was off 0.9%. Some observers see the weather-related weakness over the past few sessions as a temporary issue that will soon be overtaken by other factors. "In the short run, the weather is a wild card, but we expect a return to more seasonal temperatures," says Derek Burleton, a senior economist at TD Economics in Toronto. "At that point some of the price dip will be reversed." Underlying the markets are strong fundamentals, including good growth in the global economy, and OPEC, which Burleton says will likely cut production. He spies a bottom at $50 a barrel for crude, with a return to more than $60 in the second half of the year. Among the major producers shares of BP ( BP) declined after the company warned that fourth-quarter output would slide more than 5%. The company estimates it pumped out the equivalent of 3.82 billion barrels a day, compared with 4.02 billion barrels a day in the same period a year before. In addition, refined margins shrank about 17% over the same period. The stock lost 2.9%.
Another industry watcher sees the current pullback in the energy complex as an opportunity to profit. "Longer term, my view remains that more oil is demanded than is available in the world," says John Bollinger, president of Manhattan Beach, Calif.-based Bollinger Capital. "Any time we see weakness in energy stocks then that creates attractive opportunities to acquire energy assets." He prefers oil services and support stocks rather than those of the producers, but he wouldn't name any of his favorites. Well-known companies in the services space include Halliburton ( HAL) and Schlumberger ( SLB). Both stocks were declining less than 1%. Elsewhere, J.P. Morgan downgraded shares of Brigham Exploration ( BEXP) to underweight from overweight. The shares were off 2%. As for the major oil stocks, shares of Chevron ( CVX) were down 1.2%, and ConocoPhillips ( COP) was off 2.6%. Exxon Mobil ( XOM) was down 0.8%.