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Wall Street History
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05/30/2008
Energy Barometers...another look
Back in November 2006, I first took a look at the price of oil vs. the performance of various equity benchmarks. So, with oil having more than doubled since that piece, it’s a good time to revisit the issue, especially if you are a trader.
Just like the S&P 500 is the chief broad indicator for the stock market (the Dow Jones Industrial Average gets the headlines, but non-sector specific money managers are graded vs. the S&P), for energy stocks two of the chief benchmarks that I follow daily are the OSX and XOI.
The OSX is comprised of oil service companies and drillers, among which are operators such as Baker Hughes, Nabors, Rowan, and Schlumberger.
The XOI is comprised of the major integrateds, including the likes of BP, Chevron, ConocoPhillips and ExxonMobil.
Both have been volatile, with rallies and corrections of 10 to 15 percent often occurring in a matter of days and weeks. The moves are exacerbated by ‘hot money,’ hedge funds, that trade the energy sector as part of the overall boom in commodities; one fueled by increasing demand from China and India beyond what was expected just a few years earlier.
Geopolitical concerns have also been a key factor, particularly with Iran and the ongoing potential for military action there over its nuclear weapons program, as well as political strife with key energy producer Nigeria, to cite just two energy hot spots.
Fundamentally, back in Nov. 2006, I was writing that inventories were more than sufficient to meet rising demand, but that is no longer perceived to be the case amidst increasing talk of ‘peak oil,’ a topic I’ll spend more time on next week.
And, of course, now we’re entering the hurricane season. We’ve had two easy years after the death and destruction, including massive supply disruptions, of 2005. Your guess is as good as mine on ’08 and its potential to wreak havoc.
Here are some key data points.
[closing figures rounding off]
OSX
12/31/04 123 (index level) ($43 oil price) 12/31/05 182 ($61) 4/21/06 ..228 ($75) 9/22/06 ..176 ($61) 12/29/06 199 ($61) 3/30/07 ..214 ($66) 6/1/07 252 ($65) 8/24/07 ..267 ($71) 10/19/07 286 ($89) 12/7/07 ..296 ($88) 12/31/07 301 ($96) 2/8/08 255 ($92) 3/20/08 ..258 ($102) 5/2/08 314 ($116) 5/23/08 ..335 ($132)
*Intraday high is 356, set 5/21/08, when oil hit $135
XOI
12/31/04 .721 ($43) 12/31/05 .986 ($61) 4/21/06 .1185 ($75) 9/22/06 .1039 ($61) 12/29/06 1188 ($61) 3/30/07 ..1216 ($66) 6/1/07 1388 ($65) 8/24/07 ..1352 ($71) 10/19/07 1456 ($89) 12/7/07 ..1478 ($88) 12/31/07 1559 ($96) 2/8/08 1331 ($92) 3/20/08 ..1324 ($102) 5/2/08 1490 ($116) 5/23/08 ..1587 ($132)
*Intraday high is 1663, also set 5/21/08
Sources: Yahoo Finance, StocksandNews.com database
Wall Street History will return next week. More on energy.
Brian Trumbore
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