Took this from the BESPOKE site. I am wondering the same thoughts, are the oil stocks ahead of the oil price or is this a trend that can continue? I question on this as I work in this industry and have a lot of investments in it. I think that as long as oil stays in the $70 – $90 range we will see the company stocks continue up. the PE for most of these is at low compared to many other sectors but the past has also been “boom” and “bust” so my fear is are we aimed at a boom? I have no clue on the direction or outcome but feel that we are just in the beginnings of a unprecedented growth surge for energy companies. The reality may be that we have hit a level of available “real” production and resources that will force prices to stay high relative to previous cycles. It takes so long for new production to actually hit the market once found and the declines of old fields are extremely high at present, that even though we have no real growth in demand for many areas of the world, the supply is not pushing forward either. That , in my mind, is going to equal “PEAK OIL” no matter what the final numbers are. – WD0AJG
Oil vs.. Oil Stocks
FRIDAY, FEBRUARY 18, 2011 AT 12:07PM
If you’ve been following the markets lately, you know that energy stocks have been soaring. As shown in the first chart below, the S&P 500 Energy sector has basically had an uninterrupted trek higher since last August, gaining 50% over this time period. The sector is currently extended well into overbought territory at more than two standard deviations above its 50-day moving average. As shown in the second chart, oil (the commodity) has also been trending higher, but its move has been nothing like the move in oil stocks. Recently oil has moved to the bottom of its trading range.
After noticing the recent divergence between oil and oil stocks, we decided to take a look at the historical relationship between the two to see how things look now compared to the past. Below is a chart showing the ratio between the S&P 500 Energy sector and oil going back to 1990. When the line is rising, oil stocks are outperforming oil, and vice versa for a declining line. While the ratio has indeed picked up recently, it is still closer to the bottom of its historical range than the top. Does this mean oil stocks can run even farther?
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