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Email UpdatesYesterday, the energy sector gained 1.69%, as money flowed into ExxonMobil (NYSE:XOM), up 2.63%; ConocoPhillips (NYSE:COP), up 3.07%, Transocean (NYSE:RIG), up 3.21%; and Apache (NYSE:APA), up 6.04%. Other big gainers were oilfield services companies, with OMNI (NASDAQ:OMNI) up 11.52% and Newpark (NYSE:NR) setting a new 52-week high.
Refiners fared worse, with Western Refining (NYSE:WNR) off 11.22% for the day and Alon (NYSE:ALJ) off 6.53%. In light of last Friday’s huge jump in crude oil, this all makes some sense. The oil majors and the E&P companies are getting their reserves factored in at the new prices. New exploration and drilling is bumping up the services companies. Refiners, who can’t raise prices fast enough to offset the costs of crude, are falling.
Many analysts think last week’s spike in crude prices was the result ofshort covering, abetted by the strengthening dollar. That may accountfor the uptick in companies with E&P plays, but what about servicescompanies? Yesterday’s surge indicates that traders are pricing newoperations into the companies’ stocks. But, if demand for crude isdropping, and according to the IEA, the latest projections for the restof 2008 indicate a global drop of 70,000 b/d, then it iscounter-intuitive that drilling will increase.
