Weekly price checks

This was another crazy week for energy equities.  The market in general had a strong week, but the energy sector outperformed the broader market and oil keeps going up.  Gas was weak, but several of the gas E&Ps did quite well.  Notably Southwestern (SWN) and EQT, Ultra and Approach all were up pretty big.  Its interesting, because I would consider these to generally be the lower quality gas companies, with the exception of SWN.  RRC and Cabot, the two premier names, were both flat or off.  RRC is having problems because of their decision to get equity financing.  I continue to consider buying some Cabot, but haven’t done the work yet.  I’m going to try to get in a Marcellus post this week as part of my Cabot prep work.

Standing back from this crazy rally in energy equities of the past few weeks I’m trying to get some perspective on what’s going on.  I feel that I am not very tied in to market sentiment, because I really don’t read any research from the street, or even popular investing articles.  I do think that even as of two months ago there was a conventional wisdom that oil prices were poised to come down.  This was also visible in the futures market, with oil long dated futures trading far below spot.  Unfortunately I cannot see the futures curve without using the NY public library Bloomberg terminals, so I don't have a more recent update, but I would bet that the long end of the curve has come up big.  The spot price move in oil over the past few months has been real, but nothing too spectacular.  Since mid April, WTI moved from 103 and change to 106 and change.  Brent went from 109 to 114.  The S&P is up 5% over that period, and the energy ETFs are up about 10%.  I do think that the E&P equity rally is related to both the overall market rally, the move in oil prices, but also a shift in sentiment about the long term direction of oil.  This sentiment had been rather bearish even recently, but has shifted.  Iraq certainly has a lot to do with this shift, but it isn’t necessarily the whole reason.

Some of the price moves  over the past months are remarkable.  The pure play gas companies all did terrible (Chesapeake now has significant oil production, so I’m not including them in that).  The absolute worst of all was Cabot, the one I am now most inclined to buy right now.  Pioneer might be my first pick to short, if I dared.