Since my basic questions have failed to engender a response, for humor I paste a section from tomorrow's Barron's.
WTF is the logic of this view?
Peter Perkins, the global investment strategist for BCA Research in Montreal, thinks the odds are high for a near-term reversal. "Oil prices look vulnerable to a correction," he says. Perkins notes that both crude prices and oil stocks have continued to rise in the face of steadily rising crude inventories, something that hasn't happened historically -- in fact, it's something that anyone who ever drew supply and demand curves in Econ 1A will tell you doesn't make a whole lot of sense. As for oil stocks, Perkins notes that they "have just gone vertical" and that gravity likely will reassert itself. "They rarely run that far, that fast. It suggests we should be getting a correction."
Nonetheless, Perkins asserts that "the structural backdrop for oil is still bullish." As Perkins points out, the U.S. Department of Energy last week forecast that the price of crude would average in the high-to-mid $40s throughout 2005 and 2006. And the DOE noted that supply imbalances -- real or imagined -- could continue to result in prices north of $50 a barrel. Not long ago, Perkins notes, the consensus was that the sustainable long-term oil price would be in the mid-$20 range.
"Oil stocks have arguably only moved up in line with oil prices," Perkins says. "P/E ratios are broadly consistent with historical norms. We had a big move, and they are overdone short-term, but the stocks are still fundamentally in line with the underlying oil-price picture. The run-up does not appear to be unjustified."
I guess he must have read HTP this weekend :)
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