Selective investment in cheap Russian oil companies and firms able to exploit demands for greater environmental safety and controls in energy were cited as promising investments by analysts from Standard & Poor’s Equity Research yesterday.

Oil firms such as Gazprom, Lukoil and Rosneft, as well as some of the less well kown Russian firms, look relatively cheap at current valuations and represent a good buy-and-hold opportunity on a three- to four-year view, Christine Tiscareno, analyst for S&P, told a media presentation in London on the outlook for the global oil and gas industry.

Russian oil firms' market valuations have in recent years suffered, relative to some other comparable companies, from concerns about political interference with foreign equity stakes and the ability of investors to make good on any holdings.

And she also singled out firms which make equipment or provide services in areas such as health, safety and environment protection, saying they should benefit from the demand for such services in the wake of the BP deep sea oil disaster in the Gulf of Mexico.

“Because of the explosion, you’re going to have a lot of requirements and oil service companies will have a lot of excuses to sell services to the big oil companies,” she said.

Other analysts have said such businesses will do well following the Gulf disaster; firms in this sector include companies such as Schlumberger, an international firm supplying the oil industry, US-based Cameron, and Wood Group, a business in the UK and US.

Tiscareno said the average dividend yield on major oil firms' equities was around 5 per cent, as against a two-year US bond yield of around 2.4 per cent (source: Bloomberg).

Asked if oil could be described as a safe-haven asset akin to gold, sometimes explaining why oil has been dubbed “black gold”, Tiscareno said this was unwise, as oil was typically a more volatile market than for the yellow metal.

If an investor bought oil stocks and wanted to hedge against shifts in the price via the futures market there is the constant risk of changes in the cost of financing any such market positions, she said.

In broader terms, the oil market is unlikely to see a return to low prices of the kind recorded in the late 1990s, when for a period crude oil fetched less than $10 per barrel, the S&P event heard. Rising emerging market demand and fewer easily available sources of supply, are combining to keep oil at relatively high prices.

According to the International Energy Agency, more than 20 million barrels per day of new oil demand will come into play by 2030, much of it coming from economies such as China.