Energy prices sank Thursday to another 19-month low as colder winter weather failed to provide any relief from a multisession pullback. Nearby contracts for light sweet crude closed down $2.14, or 4%, at $51.88 a barrel on the New York Mercantile Exchange. Natural gas was 46 cents lower at $6.29 per million British thermal units. Heating oil was down 5 cents at $1.48 a gallon, and gasoline was losing 4 cents at $1.39 a gallon. "There is just no reason to feel very bullish right now," says Gary Mead, an analyst at Virtual Energy in London. "OPEC cuts have not taken effect, last year's hurricane season passed without incident, and supplies seem pretty secure." Longer-term Mead sees increasing reliance on biofuels, especially in the U.S., now that energy independence has become a political issue. "From what I'm reading, there is a real will to change," he says. Elsewhere, the effects of the recent warmer weather were still rippling through the system. Underground stores of natural gas remain above the 3 trillion cubic feet level, compared to 2.6 trillion a year ago, the Energy Information Administration reports. As for stocks, at least one money manager sees opportunity among the oil gloom. "From a technical standpoint, the trend is still lower in the near term," says Brian Hicks, co-portfolio manager of the ( PSPFX) U.S. Global Investors Global Resources Fund . "But at some point we should get support from OPEC," which will be bullish for prices.
The world's biggest oil-exporting group is in the midst of cutting production in order to shore up crude, saying it will reduce output by 1.7 million barrels a day by early February. However, not every analyst is convinced the entire amount will actually come out of the global supply. During past cuts, some OPEC members have said they would lower output but then failed to follow through. "After the recent selloff, we like Marathon Oil ( MRO)," says Hicks. "It has a good combination of solid production growth and stronger margins on refining." Also in the energy patch, Bernstein upgraded shares of Valero Energy ( VLO) and Sunoco ( SUN) to market-perform from underperform. The stocks were rising 1.1% and 1.7%, respectively. Major oil producers generally declined. Exxon Mobil ( XOM) was down 6 cents at $70.93, and Chevron ( CVX) lost 85 cents to $68.56. The iShares Dow Jones U.S. Oil & Gas Exploration Index ( IEO) was off a hair.