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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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-05/30/2008-      
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Wall Street History

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