LONDON Companies supplying miners with equipment and services have performed better than their oil sector peers, buoyed by spending on new technology and expectations the demand outlook for other minerals is more bullish than for fuel.
The index of mining services companies, such as Atlas Copco, Sandvik and Metso, has risen more than 50 percent over the last 12 months.
In contrast, the oil services index has barely moved as companies such as Saipem, Technip FMC and SBM Offshore grapple with the thinnest order books in 13 years.
Analysts say the picture is particularly bleak for the European oil services sector.
"For most of the markets that the European oil services companies serve, it's almost arithmetically impossible for revenue to go up this year," Alex Brooks, equity analyst at Canaccord Genuity, said, referring to a drop in service contracts.
Any increase is unlikely for now as oil prices hover above $50 a barrel, depressed by oversupply, despite last week's decision led by the Organization of the Petroleum Exporting Countries to maintain output curbs.
The outlook is fundamentally stronger for miners and their supply companies, although lingering nervousness following the commodity price crash of 2015 means they are unwilling to risk shareholder disapproval by embarking on major new projects.
Instead, most of the spending is to boost mine output and from the sector's belated recourse to technology to cut costs and improve margins.
Sandvik said it had seen growth in demand for automation, which so far represents a small part of the mining sector, leaving room for more growth. Analysts say any spending in the oil sector, which has already experienced the kind of technical breakthroughs creeping into mining, is focused on maintenance or expanding existing production.
"If you're an oil guy who lives off building new subsea structures and new pipelines, this is a very worrying trend," Nicholas Green, senior equity analyst at Bernstein, said.
Longer, as well as shorter term prospects, are brighter for mining service companies that have reported more orders this year.
Mining executives predict a quicker uptake in electric vehicles than previously expected will lift the sector as a whole as consumption of minerals, such as copper and cobalt grows, while oil demand retreats.
"Technology is bad for energy consumption and for some metals, it could be very good," Jefferies analyst Chris LaFemina said.
But concerns about the economic health of China, the biggest commodities consumer, were capping growth across the resources sector, he added.
The major miners, which led gains on Britain's benchmark FTSE-100 stock index last year, have lost momentum in 2017, while iron ore, the commodity most closely linked to their performance, is slightly weaker than at the start of the year following a 300 percent gain in 2016.
(Additional reporting by Vikram Subhedar; Editing by Mark Potter)