Analyst Advises Profit-Taking In Oilfield Service Sector

The recent three-month rally in crude oil prices could spur production and reignite over-supply worries, an analyst said Monday. Citi's Scott Gruber downgraded four onshore oilfield services companies on Monday, suggesting that investors in the oil field services sector "take profits and take a vacation." The Philadelphia Oil Service Sector index OSX is up about 20 percent from a recent bottom in January, although it's down 5 percent from last week's high. An uptick in oil prices has "set the stage for a robust drilling recovery," according to Gruber, who said the industry is probably jumping the gun. Given the threat of renewed oversupply, "the question is how many rigs are required," Gruber said. Gruber on Monday cut his rating to Sell on both Atlanta-based RPC Inc. RES and National-Oilwell Varco Inc. NOV and reiterated a Sell rating on Helmerich & Payne Inc. HP. Additionally, Gruber downgraded to Neutral both Patterson-UTI Energy Inc. PTEN and Weatherford International Plc WFT. "Supply concerns will likely manifest as soon as the rig count begins to rally," Grubers said.