Oil Sector
Jim, great call on the sector. I'm convinced that it's not a substainable move and am interested in your opinion.
The crossover in the short term moving avgs. indicated a pop, but the longer term avgs. still show that the sector chart has a lot of work needed. The 200 day EMA is still under the 50 day EMA, while the price has spiked over it's trading range.
iqc.com.
decisionpoint.com
I think that the rally was created by oil prices hitting a technical bottom. The rally was short term and the move up may have been strengthened by short covering.
World demand has not increased while supply has remained almost constant to last year's level. Asian economies are forecast to turn around in another year or so. There is a chance that the increase in the price of oil if it is substained, will make it palatable for OPEC to actually cut production this time.
From Bloomberg:
Energy News
Sat, 13 Mar 1999, 11:49am EST
bloomberg.com
U.S. Oil Stocks Rally Not Likely to Last, Analysts Say: Stocks Outlook
Oil Rally Unlikely to Last: U.S. Stocks Outlook (Update1)
(Updates with closing prices.)
New York, March 12 (Bloomberg) -- The rally in oil stocks
that helped send the Dow Jones Industrial Average and the
Standard & Poor's 500 Index to records this week is unlikely to
last, money managers say.
That could make it all the more difficult for the Dow
average to top 10,000, after coming within 42 points of the mark
today.
The Standard & Poor's Corp. index of international oil
stocks rose 7.8 percent Wednesday and Thursday, its biggest two-
day advance this decade, on expectations that producers would cut
output enough to boost prices.
Exxon Corp., a member of the Dow average, rose 14 percent
since March 2, while Texaco Inc. jumped 22 percent and Mobil
Corp. added 16 percent. Still, money managers weren't optimistic
that the stocks would be able to hold their gains.
''It's a short-term event,'' said Robert Froehlich, chief
investment officer at Scudder Kemper Investments Inc., which
manages $350 billion. ''The fundamental price of oil is driven
more by demand than supply, and we have an overabundance of
oil.''
Crude topped $15 a barrel today for the first time in five
months as oil producers from Saudi Arabia, Algeria, Iran, Mexico
and Venezuela agreed to idle almost 3 percent of the world's
output in an effort to end a world glut. The price retreated to
$14.49 amid concern that supplies are too high to justify such a
big gain.
''We have been down this road before, and I am not
convinced'' oil stocks have more room to rise,'' said Bryan
Piskorowski, a market analyst with Prudential Securities Inc.
The Paris-based International Energy Agency estimates the
industrialized nations have 83 days supply of crude and petroleum
products on hand. That's little changed from the 82 days at the
end of 1997, even after OPEC pledged last June to cut 2.6 million
barrels a day from world markets. OPEC next meets on March 23.
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