BAY STREET-Energy: The year of living unspectacularly

* Oil and gas shares have held in range for nearly a year

* Uncertainty over economy, oil demand blamed

* Analysts warn jobs data not top factor

By Jeffrey Jones

CALGARY, Alberta, Aug 15 (BestGrowthStock) – For the energy
industry, the past 12 months have brought a parade of good, bad
and downright ugly headlines. Surprisingly, Bay Street has
responded with marked indifference, or so it would seem.

Big-ticket takeovers, shale gas discoveries, oil spills and
environmental battles: None of those stories could tell
investors whether demand for oil would trend up or down.

That may prove a good thing for those who could afford to
sit tight. Energy companies, now with attractive valuations,
have used the lull to set the stage for a strong rebound once
the spark finally comes.

But only solid economic evidence of a sustained economic
recovery or a double-dip recession will get things rolling,
analysts say. To date, it has been difficult to make a
convincing case for either scenario.

“What would help to break things out to the upside is if we
got some more definitive signs of further demand improvement in
the U.S., China, Southeast Asia, or if there was some clear
indication that non-OPEC supply growth was slowing and perhaps
going negative in 2011,” analyst Martin King of FirstEnergy
Capital Corp said.

“But right now I don’t see any of those things happening.”

Canadian energy stocks have been stuck for nearly a year as
crude prices have held to a flat track amid economic
uncertainty and high inventories. A year ago, oil was in the
$70s per barrel. It settled on Friday at $75.39 a barrel.

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Graphic: http://link.reuters.com/myg94n

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Oil weakened this past week as U.S. data showed that the
number of people filing new claims for unemployment benefits
jumped to the highest in almost six months.

That only added to concerns about weaker global demand
after the U.S. Federal Reserve painted a picture of a fragile
recovery and Chinese data showed sputtering factory growth.

Analysts warned against getting too wrapped up in
employment stats when trying to gauge the outlook for oil.

“Demand is going to be related to some degree by job
growth, but for me, when people look at jobs data that’s just
another data point they use to draw retail money back and forth
from sector to sector,” King said.

OIL BULLS

Despite the unflashy performance, Lanny Pendill, an analyst
with Edward Jones, is a bull on the sector’s long-term
prospects, recommending a 15 percent weighting in portfolios.

“Energy is very economics-sensitive, naturally, so when
concerns around double dips and things of that sort begin to
hit the front pages of the papers, energy’s probably not going
to be on the top of the list for investors,” Pendill said.

He preaches patience. Second-quarter results showed many of
Canada’s oil companies earning more than expected, amassing
cash and slashing debt, all laying the groundwork for more
investment when economic conditions finally improve.

Meanwhile, stock prices are discounted from levels that
were the norm before the recession.

The Toronto Stock Exchange’s oil and gas group (.SPTTEN: ),
which includes shares of integrated oil companies, independent
producers and oil field service providers, is up 3 percent
since last September.

That lags 4 percent gain in the broader Toronto market
(.GSPTSE: ) of which energy accounts for more than a quarter.

In that time, the energy group has not moved beyond a
40-point range below 308 points.

To put it into perspective, the group oscillated in a
gaping, 180-point range in the previous 12 months. To be sure,
that included the economic meltdown of late 2008, so maybe
investors were happy to forgo quite that level of excitement.

Year-to-date performance has looked worse.

Since the start of 2010, the energy group, with names like
Suncor Energy Inc (SU.TO: ), Imperial Oil Ltd (IMO.TO: ) and
Talisman Energy Inc (TLM.TO: ), is down about 8 percent. It
closed on Friday at 272.27. That compares with a 1.5 percent
drop in the broad market.

It may not be this year, but investors who dare to be dull
today could reap rewards, Pendill said.

“I think that over time the oil market will re-tighten and
we could very well get back into the position, potentially,
five years out where we’re having challenges meeting demand,”
he said.
(Editing by Frank McGurty and Janet Guttsman)

BAY STREET-Energy: The year of living unspectacularly