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Petroleum industry earnings rose in 1996, assisted by increased natural gas and oil prices and are expected to show gradual increases for the next 3-5 years, although there will be little price increase in 1997. Petroleum industry stocks have a high Timeliness rating and are attractive on a long-term basis but investors should carefully exam the direction of both oil and natural gas prices.

Petroleum industry securities have and continue to carry high timeliness ratings, the industry is expected to increase its strength in 1977, oil supply and demand are well balanced and new discovery is being planned which should, but may not, indicate wise investment material. Individual companies should be evaluated before investing in them and investors should determine if new exploration is to take place in hostile foreign countries that might seize properties, check on whether a balmy winter season would seriously affect fuel oil sales and determine if the company has sufficient capital to weather possible setbacks.

Demand for petroleum and natural gas is increasing in 1996, and oil and gas prices are rising or remaining firm. Production is also increasing in 1996, and several producers are planning higher output in 1997, as well. The oil and gas industry is timely for 1996, but earnings may swing from financial leverage and overseas political uncertainty. These stocks have prospects to outperform the market and are recommended for risk-tolerant investors.

Limited oil exports from Iraq will help ease oil prices, and legislation allowing Alaskan oil exports has been signed by President Bill Clinton. Gulf of Mexico lease sales have also increased. The average reserve replacement ratios and finding costs for a five-year period have been calculated and the data show positive results for many companies. The petroleum industry is timely for 1996 and many stocks have capital gains potential.