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STOCKS NEWS EUROPE-CGG warning hits oil services shares

Shares in European oil services companies sink after French oil industry seismic surveying firm CGG (NYSE: CGG - news) lowers its profit target, citing customers pushing back major orders.

CGG shares tumble as much as 18 percent to a two-year low, in volumes more than four times their average daily volume of the past three months.

The warning also hits rivals, with Technip (Paris: FR0000131708 - news) down 4.6 percent, Petroleum Geo (Oslo: PGS.OL - news) -Services down 4.3 percent, Petrofac (Berlin: P2F.BE - news) down 2.3 percent, SBM Offshore (Frankfurt: IHCB.F - news) down 1.5 percent and Saipem (Other OTC: SAPMY - news) down 1.9 percent.

"The oil services sector is in a tough spot, with very low visibility on capital expenditures from the big oil companies, which are not sure where oil prices are going," says Bertrand Lamielle, head of asset management at B*Capital (Other OTC: CGHC - news) .

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Last September, oil major Total (NYSE: TOT - news) said it would start a "soft landing" in 2014 to scale back heavy capital spending.

The STOXX Europe oil and gas sector index is down 1.8 percent so far this year, the second-worst sector performance in Europe and strongly underperforming an 11.6 percent rally in the broad STOXX 600 index.

Betting on the sector's negative trend, hedge funds have been increasing their short selling positions on a number of oil services companies recently, according to data from Markit. About 9 percent of CGG shares are out on loan, up from 2.9 percent in late September.

Short selling, a strategy popular with hedge funds, involves selling borrowed shares in the hope of being able to buy them back more cheaply later and pocket the difference.

Reuters Messaging: blaise.robinson.thomsonreuters.com@reuters.net