Crude Blow-off yesterday fails to support Equity Prices
Watch nat gas and gasoline going forward
Rod Raynovich Final for GEN 7/2/2007
Money is beginning to flow into the energy sector with the XLE on an up ratio of 158/100 even though prices were slightly down today. The XLE 68.35 is down over 3% in the recent correction, but still up over 30% YTD. High flying refiners VLO up 1.6%and SUN up 2.5% are among the few green stocks today but they are down over 10% from July highs. Gasoline futures are the big number to watch as prices jumped to a four month low due to an increase in refinery utilization. Thus crack spreads for major refiners have narrowed. Gasoline RBOB was up .63 today at 203.60
Crude hit an intraday high of 78.45 yesterday but speculators rushed in to take profits. Crude is running at † $76.68†today.† Traders see a short term weakness in crude but† higher prices in Q4 after the OPEC meeting and increased demand. The longer term view for the next 5 years are crude prices approaching 100 due to global growth particularly China and India. U.S. Energy Secretary Bodman said recently that a crude price of $80 could begin to affect the economy. Up until now energy prices have had little affect on the economy.
Natural gas stockpiles increased 77B cubic feet exceeding forecast dropping SEPT prices 3%. The summer has been cooler than normal and hurricanes have not yet appeared. Nat Gas stocks-CHK up slightly KWK down slightly.
MRO 52 was down 4.5% on pricing manipulation case and purchase of Western Oil Sands.
Energy Services were weak today:
- FSESX 88 down 1%
- OIH 173 down 1.4%
- SLB 92 down 2.77%
We remain equal weight energy stocks (downgrade on JY 16). Looking for trends that favor services and exploration.
(chart courtesy Seeking Alpha)
Energy Stocks down Broadly 2-4%
Rod Raynovich Final for GEN 7/16/2007
BHI profit warning could be the catalyst and it is down 3%. Crude stable at $74. The XLE is down 2% but is 40% + above January lows. SLB and VLO are most stable stocks.
The ratio of the S&P Energy stocks to the oil price is 7.7 a little higher than the average 7.0.
Oil Sector Stocks Versus Oil Commodity Price: A Historic Look
Energy stocks pull back on natural-gas weakness
Also This Week’s Barron’s Cover story is bullish on GREEN energy stocks like SPWR and FTEK. The article points to $1.5B in VC funding for “Clean Technology”. Global Warming =alt energy profits??
Last week everyone was ultra bullish on energy including a CNBC report that Billionaires were most bullish on the energy sector.
Stay long energy stocks but adjust to equal weight for short term.
Consider lightening up on overweight positions today as energy stocks are already down 2-3%.
Rod Raynovich 6/20/2007
But we are off the lows for the day. OIH down 1.6%,XLE down 2%.† VLO and SUN also down about 2%.
Energy has been the sector market leader as of late.
N.Y. Crude Oil Falls a Second Day on Surging U.S. Inventories
AP reports Oil prices up on Nigerian troubles
Rod Raynovich 6/18/2007
Nigeria is the third biggest exporter of oil to the U.S. after Canada and Mexico. The threat of a strike combined with attacks on the oil facilities by renegades spurred some buying of futures despite skeptics on the strike.
Crude is also being pulled up because of gasoline demand with the peak driving season ahead.
Steven Schork an energy bull who publishes the Schork report expects crude to hit 72-74 and nat gas to eventually spike up as hurricane season kicks in.
More bullish energy calls from MM’s and analysts
The MidYear Barron’s Roundtable included bullish call from several analysts citing continuing global growth and demand for natural resources. Felix Zulauf likes the S&P 500 Energy Index,Canada(Toronto Index) and Natural Gas.
Archie MacAllaster likes Valero VLO.
Abbie Cohen also likes Valero.
On January 17 we called an intermediate bottom in energy and since then the XLE(71) is up 40% and the OIH(178) is up 37%. Movers today are APC 54.83 up 1.8%,DVN 83.69 up 1.6%,SUN 85.95 up 1.2%, TSO 63 up 1.8%,Valero 77.60 up 1.44%. Many of the Mid-cap and large cap energy/value stocks-0SUN,RRI,TSO,APC,DVN,APA EXC MRO- had nice runs of 5-6% last week. Bellwhether CDN energy trust PGH was up 1% at 19 off low of 16 in JAN.
Stay long energy and metal stocks esp. refiners. Stay long Canada index or Mutual Funds.
Despite a lot of skepticism and downgrading of the energy sector due to reduced growth forecasts for 2008 recent bullish reports of overall global growth have caused some analysts to raise earnings estimates and price targets. Refiners look attractive because of gasoline demand, higher spreads between crude and refined oil , and inability to build new plants (NIMN not in my neighborhood).
Coal was downgraded today and stocks-ACI BTU FDG MEE- are selling off big time down 3-4%.
Broad rally in energy stocks with refiners in the lead
Rod Raynovich 5/17/2007
Among today’s leaders up 1-2% + are APC,COP,CRZO, DIG, FTO, KWK, MRO, NFX, RIG, SWN(up 3,5%),TSO,VLO,XLE.
Many stocks have hit new highs.
The XLE is 66.50 a new high. Many analysts suggested to take profits last week but concerns about gasoline shortages for the summer driving season and a spike in crude prices also due to gasoline supply shortages and refinery problems. Gasoline is up 50% YTD. Nigeria also remains a concern.
The OSX oil service index is also at a new high of 245 up 1% today.
New buys we have made in past 3 days are NFX and FTO. Remain overweight energy stocks.
Giddy bulls can continue to climb a wall of worry with this attached commentary from Marc Faber who reiterates caution and the well known fact about U.S. stocks
underperforming Int’l stocks.
Refiners big run is waning
Rod Raynovich 5/3/2007
Tesoro is off 7% today to 114 level. You coulda bought it at 65 in January! TSO profits doubled due to gasoline shortages and high demand but they missed Wall Street higher expectations hence the sell-off.
VLO is also up more than 50% from its January lows and is up .6% at $73.33. VLO sold a Lima refinery for $1.9 B.
SUN is down 2.6% at $75.61
So if you are whining about gas prices headed toward $4.00, 100 shares of VLO would have paid your SUV gas bill for all of 2007.
More updates from Zman at SeekingAlpha, Energy Stock Trader: Thursday Outlook
Most energy sectors are up 1% today. Among the winners are :
- CHK 35.90 up .84%
- CNQ 62.76 up 3%
- DVN 75.96 up 2.3%
- PAA is up 3% at 59.
- Gold is up 9.40 at 676.
We called the bottom in January with an XLE at intermediate bottom of 50 and it is now at $64.66. Traders should take big profits in refiners here but the energy sector is still a long term hold.
Stay long natural resource stocks.
In the meantime watch out on the Energy Trust front. We bought PGH on weakness at 17.
TAX WOES FOR TRUSTS
Canadian trusts, most paying fat double-digit dividends, and often
associated with energy and real estate companies, have attracted a
loyal American following among income-oriented investors.
If you’re one of them, watch out: Legislation has been introduced in
both the U.S. House and Senate that would end their preferential tax
treatment, warns Washington Analysis, Prudential Equity Group’s eyes
and ears in the nation’s capital. Tax rates for such trust income
could increase to up to 35% from 15%, depending on the legislation. A
WA senior policy analyst, Tim VandenBerg, cautions that there could be
an exodus of American investors from these shares because of the
enactment — or even the consideration — of such a tax proposal. This
would put additional pressure on stocks that have already suffered
from adverse changes, both pending and proposed, in Canadian taxation.
Among the stocks thought to be at risk are the following names traded
on the New York and American Stock Exchanges: Advantage Energy Income;
Baytex Energy Trust; Canetic Resources Trust; Enerplus Resources Fund;
Harvest Energy; Pengrowth Energy Trust; Penn West Energy Trust;
PrimeWest Energy Trust, and Provident Energy Trust.
Weather issues fall by the wayside; Global Economy to the forefront
Rod Raynovich 3/19/2007
With winter about over and the OPEC Meeting ending last week with no clear signals , crude is holding at $57.
Why ConocoPhillips is a Buy and Hold
Rod Raynovich 3/7/2007
One of the few places for action today. Refiners up 1%+
and FTO up 2.3%, SWN up 2.58% WFT up 2.3%.
XLE is midrange at 56.9
Rod Raynovich 2/21/2007
Gold tracks oil we know but why is Gold up $20 after yesterdays’ sell off? Are central banks buying? Big movers are refiners VLO and SUN up about 3%. VLO is now up 15% from Jan 19 bottom.
Gold is up $20 and gold stocks MDG KGC RGLD GSS etc are up 3-5%.
Oil Services Lead Rally
Rod Raynovich 1/19/2007
The OIH oil services ETF is up 2.5% at 131.8 as a broad energy rally takes place. Despite the first decline of 3% in oil consumption in the developed world† in the developed world, many traders feel we are close to a bottom despite cautionary remarks that crude could push to 46-48. Crude slid 3.4% yesterday below 50 as U.S stockpiles rose by the largest amount in more than four years.
Speculators may have moved on and terrorism fears have been temporarily been quelled.
Crude is at 51.38 up .9. Gold is rallying up 8 at 636.
Among the movers:
- VLO 50+ up 1.8 %
- COP 64 up 2%
- CHK 28.6 up 1.8%
- KWK 36.4 up 6%
- SLB 60 up 4.5%
- SWN 36 up 5.5%
- XTO 43 up 2%
- XLE 56 up 2%
Tobin Smith of Change Wave Research is peddling Canadian Energy Trusts saying the Canadian Govt will help sort† out the tax mess for investors. However PGH can get no respect today down .9% at 16.8 despite a 15% royalty.
Joining the Canadian club
Rod Raynovich 1/17/2007
I like today’s action. I’ll go with Boone Pickens who says we have a bottom.
But I will wait till 3p before adding OIH or XLE as we are off AM highs.
Many energy stocks SLB PGH VLO are up 1-2%, and are above last week’s lows. Some bears still waiting for crude under 50 like 45-46.
Rod Raynovich 1/5/2007
A new blog will be coming but due to:
- Computer Issues
I haven’t had time to focus.
I am looking for the XLE to hold at 55 today and early next week.
VLO also needs to hold at 50ish, PGH holding at 16.5 and crude holding at 55 today.
The bears are in charge for now in the energy patch.