LONDON (ShareCast) - (ShareCast News) - Shares in Tullow Oil and Soco International were under pressure after Macquarie downgraded both stocks to 'neutral' from 'outperform' on valuation grounds, as it took a look at the European exploration and production sector.
Macquarie pointed out that crude oil price rose by $10 in the six weeks to 12 October.

"Most share prices have shown a stronger response than our sensitivity models predicted, however, and some have now overshot their fundamental values in our opinion," it said.

The bank noted that Tullow shares have risen 43% since late September on both oil prices and the alleviation of near-term balance sheet concerns, and are now trading close to fair value.

As far as Soco is concerned, it said reaction to the oil price rise has been even stronger, despite there having been no operational catalysts.

Macquarie added that Soco now trades close to its 186p price target.

The bank said its analysis shows that the average oil price being discounted across the sector is a flat $72, which means investors need a relatively bullish view on oil to be 'overweight' in the E&P sector overall.

At 1035 BST, Soco shares were 2.1% lower at 184.25p and Tullow was down 2.9% at 233.50p.

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