After telling investors to pile into the energy sector earlier this year, Morgan Stanley is recommending a more cautious approach, advising investors to reduce exposure to the sector after lowering its rating on the group to ''market weight'' as risk aversion is seen as increasing.
The bank said supply shocks have been priced into shares of Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP), the three largest U.S. oil companies, respectively. All three companies report first-quarter results this week.
Morgan Stanley said the same of Schlumberger (SLB), the world's largest oilfield services provider. When risk aversion grows, investors should generally reduce their exposure to oil as an asset class, Barron's reported, citing Morgan Stanley.
Among the names in the energy group that the bank continues to like are Chevron, Apache (APA), the largest independent oil and gas producer, oil services provider McDermott International (MDR) and Atwood Oceanics (ATW), among others.