jim_p, the following chart shows OSX top being 138.78, back at the beginning of spring in 2001. I think we are within striking distance, however, this time around we have another month and one-half to go. The earnings are coming in strong and if the sector continues to receive support, we could well test those highs. With incremental capacity at a marginal level, I think the excess gas inventories are not going to cause too much harm unless we have a serious slow down in the economy. Also, it would be interesting to see what percentage of the service stocks in the OSX, versus the OIH, service oil companies versus gas companies. The oil companies are going to stay busy as far as I can tell, while the gas companies might have some slack if folks believe inventories are not an issue going forward for a couple of months. Either way, prices are plenty high to encourage drilling on both oil and gas fields.
Having said that, I have not seen a blow-off move on the sector, and therefore, I have a hard time believing we can suddenly fall off from an easy, steady rise coupled with minor corrections. I have not seen a strong news event or a conclusion to this situation that we face today with little incremental capacity available.
So to summarize, I still think energy companies are going to enjoy a strong year, and calling a top, aside from a seasonal pattern, might be challenging without any external catalyst, such as a slow down, or significant dollar appreciation, such as one that could result subsequent from a large bond market sell off if the yield curve flattens too much or if the trade imbalances are not corrected. |
