Black Gold's boom makes Big Oil defensive play

By Michael Erman

NEW YORK (Reuters) - With crude oil prices skyrocketing to new highs, Big Oil stocks are shaping up to be the safe play for those wanting a piece of the action.

Shares of the largest oil companies are challenging all-time highs they hit last July, but they aren't seeing quite the dizzying highs suggested by the performance of their base commodity due to scepticism about the surge in oil prices and weak refining profits.

The more-modest growth rates in Big Oil stock prices make the sector a defensive play for investors who are unsure about crude's record rise, allowing more room to run if oil continues upward but plenty of support if it drops.

"They are a great place to be right now -- when our models and our forecasts project that oil prices are likely to turn," said Standard and Poor's equity analyst Tina Vital.

But even if oil stays high, the companies will still likely benefit, she said.

"While oil prices have moved up, they haven't moved up in tandem. A lot of their valuations look pretty compelling," she said.

U.S. crude oil prices are up more than sixfold since 2002, propelled to over $130 a barrel by rising consumption in China and other developing countries, supply concerns, the weak U.S. dollar and a flood of investors betting on the future price of crude.

The cost to buy a barrel of oil has soared nearly 75 percent since mid-July, when they were trading around $75 a barrel. But in that period, shares of the biggest oil companies, which both produce oil and refine it to make gasoline, have stayed relatively flat.