Hi Big!
First, I want to say that while I disagree with you about the Oil Price Thing, I have great respect for your expertise in regard to rigs and your knowledge of the Oil Business in general. I appreciate your sharing your knowledge and opinions with the thread.
I am just a simple grrl, but I have given this some thought, and talked with my dog Socrates about it, and this is mvho:
Oil Price and Sector Stock Price are both artifacts of Demand/Supply and react positively to increased (Supply-Adjusted) Demand. But they are Not Causally related to each other in any important way. And since there are factors affecting each which do not affect the other in the same way, either could move up or down without the other neccessarily moving, or one could precede the other up or down.
With that in mind, I think that the thing to watch is 'Future (Supply-Adjusted) Demand', Not Oil Price. I think my position is based on fact and reason, and recent history seems to support my conclusions.
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Let me use extreme hypothetical examples to make my point:
--- What if Oil Price stayed low, but Demand Doubled? Would anyone want to drill?
I think the Sector would be making money hand-over-fist as long as the Oil Price was just a little higher than the cost of production (which it would be, of course.)
---And what if Demand dropped by Half, but Price went to $25? OSX would be in Big Trouble. No Demand=No Work, regardless of Oil Price.
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BTW,I do think there are segments of the oil business which Are much more dependent than others on Oil Price, such as higher-cost producers and their dependent businesses.
But I think that in general this Sector will follow the Market's Perception of Future (Supply-Adjusted) Demand, and Oil Price can be left to take care of itself. Oil Price is of interest, since it can serve as a more immediate indicator of current Supply/Demand balance, but it is not Causitive in an important way.
In the short term, as a cost saving measure, Big Oil may cut back on their expenses in this Sector . But in the longer term they're out of business if they haven't got oil. They can't sell oil they haven't got, and to get it they've got to drill and service wells. They will do that as long as there's Demand. If the cost of drilling and servicing wells is prohibited by low Oil Price, then the Oil Price will rise, as long as there's Demand.
Oil Price may rise sooner or later or not at all, depending on circumstances, but Demand's the Thing To Watch.
Just mvvho, of course.
regards,
diana
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