Gasoline inventories fell by 3.324 million barrels to 206.271 million barrels, worse than the drop of 1.7 million expected by Dow JOnes.  Distillates fell by 4.266 million barrels to 149.739 million barrels, also worse than the 1.7 million draw expected by Dow Jones.

The other issue to consider is a lower refining capacity.  Refineries in the last week were shown to be at 83.1%.  While some slowing is routine, this is down from 84.2% a week earlier and worse than the 83.8% expected by Dow Jones.

Valero Energy Corporation (NYSE: VLO), the king of independent refineries, is now up 1.3% at $23.70 and is challenging 5-day highs.  Oil Services HOLDRs (NYSE: OIH) is up 0.7% at $121.95, also challenging 5-day highs.

The United States Oil (NYSE: USO) Fund is up 0.9% at $34.47, above yesterday’s high of $34.45 and back at the highest levels since September 16.  WTI is up $0.80 at $89.14 on last look.

JON C. OGG

The company beat EPS expectations of $0.15, posting earnings of $0.17, excluding items. Revenue came in at a record $3.05 billion. Strong demand in the US and overseas gets the credit. Weatherford’s share price has trailed its rivals mainly because Schlumberger, Halliburton, and Baker Hughes all made big acquisitions last year that have begun to pay off for them in revenues and profits.

Weatherford is also a portfolio company in several major oil field services ETFs, including Oil Services HLDRS (NYSE: OIH), SPDR S&P Oil & Gas Equipment & Services (NYSE: XES), PowerShares Dynamic Oil & Gas Services (NYSE: PXJ), and iShares Dow Jones US Oil Equipment Index (NYSE: IEZ).

The Oil Services HLDRS (NYSE: OIH) holds more than 45% of assets in Schlumberger, Halliburton, and Baker Hughes. Weatherford accounts for about 4.7% of total assets of $2.9 billion. OIH has posted a daily high today of $163.63, before pulling back to below $162. The 52-week trading range is $96.10-$167.37.

The SPDR S&P Oil & Gas Equipment & Services (NYSE: XES) is an equally-weighted fund that holds about 2% of its total assets of about $519 million in Weatherford shares. Shares came within pennies of posting a new 52-week high this morning, but are now trading at $43.97, slightly down from yesterday’s close at $44.03. The 52-week range is $25.38-$44.63. The fund gets a 3-star rating from Morningstar.

The PowerShares Dynamic Oil & Gas Services (NYSE: PXJ) holds about 4.7% of its $254 million of total assets in Weatherford shares. Shares rose as high as $26.55 this morning before pulling back to $23.65. The 52-week range is $14.73-$26.84. The fund gets a 2-star rating from Morningstar.

The iShares Dow Jones US Oil Equipment Index (NYSE: IEZ) holds about 4.2% of its $707 million in total assets in Weatherford shares. The fund posted a new 52-week intra-day high this morning before pulling back to stand currently at $68.67. The new 52-week range is $37.77-$69.39. The fund gets a 3-star rating from Morningstar.

Because Weatherford does not play a large role in any of these funds its impact is limited. As a whole, though, the oil field services sector is currently flourishing. Demand for rigs and equipment to drill for shale gas in the US is primarily responsible.

In the future, keep an eye on announcements from Petrobras for new contracts as well as contracts of northern and western Africa and in Iraq. The sector is could be ready for a nice upturn, with the ETFs hanging on for the ride.

Paul Ausick

Oil got another boost over the holiday weekend from a forecast in Barron’s predicting $150/barrel by the end of the second calendar quarter of 2012.  Growth of demand from developing markets, combined with a tight supply are the main drivers of the steep predicted rise.  Despite the notion that the “bulls may have been too bullish” we have looked through our list of mutual funds and exchange-traded funds which we think will benefit the most from the upside in oil.  Other leveraged funds exist, but we stuck with the volume and safety parameters in mind.

A price increase of this magnitude suggests that mutual funds and ETFs that hold substantial assets in exploration & production or oil field services stocks could be positioned for more growth. For comparison purposes, we’ve selected the Oil Services HOLDRS ETF (AMEX: OIH) and the ProShares Ultra Oil & Gas ETF (NYSE: DIG). We’ve looked at several funds and ETFs: PowerShares S&P SmallCap Energy ETF (NASDAQ: PSCE), SPDR S&P Oil & Gas Exploration and Production ETF (NYSE: XOP), PowerShares Dynamic Oil & Gas Services ETF (NYSE: PXJ), Fidelity Select Natural Resources (FNARX), and Putnam Global Natural Resources (EBERX).

The Oil Services HOLDRS ETF (NYSE: OIH) holds about $2.9 billion in assets. Year-to-date, the fund has returned 9.13% and its trailing three-month performance is -6.96%. OIH holds just 14 stocks, all of which are primarily oil field services companies.

The ProShares Ultra Oil & Gas ETF (NYSE: DIG) holds about $342 million in assets, and its year-to-date return is 22.70%, while its trailing three-month performance is -9.87%. DIG is a leveraged ETF that seeks to return 200% of the performance of the Dow Jones U.S. Oil & Gas Index.

The PowerShares S&P SmallCap Energy ETF (NASDAQ: PSCE) holds $107 million in assets. Year-to-date returns total 17.50%, while the  trailing three-month return is -6.25%. The fund holds just 20 stocks, with a mix of E&P and services companies. Its year-to-date return is nearest to that of DIG, and its three-month performance is about 50% better.

The SPDR S&P Oil & Gas Exploration and Production ETF (NYSE: XOP) holds about $603 million in total assets, and posts a year-to-date return of 13.72%. It’s trailing three-month return is -7.8%. Year-to-date this fund is performing about 50% better than OIH.

The PowerShares Dynamic Oil & Gas Services ETF (NYSE: PXJ) holds $245 million in total assets and has a year-to-date return of 13.51%. The trailing three- month return is -6.31%. The fund’s largest holding is Halliburton. Compared with OIH, the year-to-date return is about 48% higher.

The Fidelity Select Natural Resources (FNARX) fund holds total assets of $1.8 billion. The fund’s year-to-date return is 8.72% and its trailing three-month return is -6.04%. Chevron Corp. is the fund’s largest holding, while Halliburton is its largest services holding. Compared with DIG’s year-to-date return, the fund is performing less than half as well.

The Putnam Global Natural Resources (EBERX) fund holds total assets of $471 million. The fund’s year-to-date-return is 8.14%, and its trailing three-month return is -1.93%. It’s single largest holding is Exxon Mobil Corp., while Schlumberger Ltd. is its largest services holding. This fund also trails the returns of DIG by more than half, although its three-month performance is substantially better.

You will probably notice that the United States Oil (NYSE: USO) exchange-traded product is not on this screen despite it being the closest oil-tracking ETF for the price of oil.  The rolling nature of front-month futures expiring and the lack of overnight tracking all eliminate this from even being a top tracking mechanism in general.

Oil field services stocks, as a group, have performed better than E&P stocks primarily because natural gas drilling has increased onshore in the US, and more offshore drilling is getting lined up offshore of Africa. These stocks will get another boost when (if) work begins in earnest in Iraq.

E&P stocks benefit from higher crude prices, but only up to a point. When gasoline pump prices get to be in the $4-$5 range in the US, consumption decreases. When crude prices get threaten to hit $125/barrel, consumption in emerging nations can stall.

That doesn’t change the fact that currently supply dominates pricing. And that is unlikely to change — at least for a very long time.

Paul Ausick

Halliburton is the first of the services firms to report, with Schlumberger Ltd. (NYSE: SLB) and Weatherford International, Inc. (NYSE: WFT) due on April 21st, and Baker Hughes Inc. (NYSE: BHI) due on April 27th. The EPS estimates for all these firms have been revised downward more often than they have been revised upward in the last 30 days, and estimates for the second quarter are also being pushed lower.

Schlumberger is now expected to post EPS of $0.77, up 24% from the same period a year ago, on revenue of $8.84 billion. A month ago Schlumberger was expected to post EPS of $0.83, and in that time period EPS was revised downward eight times compared with one upward revision. For the second quarter, EPS has been revised from $0.92 to $0.90 in the past month.

Baker Hughes is expected to post EPS of $0.78, a jump of 81% over the first quarter of 2010. Revenue is expected to total $4.28 billion. A month ago, Baker Hughes was expected to post EPS of $0.79. During the 30 days, EPS was revised downward four times and upward just once. For the second quarter, EPS has been revised from $0.85 to $0.86 in the past 30 days.

Weatherford is expected to post EPS of $0.18, a whopping 300% jump over the $0.06 EPS it posted a year ago. Revenue is expected to total $2.84 billion. A month ago, Weatherford’s EPS estimate was pegged at $0.19, and during that period it has been revised downward four times and upward only once. For the second quarter, EPS has been revised from $0.24 to $0.21 in the past month.

The cautious forecasts on earnings are related to a number of factors. First, the weather gets some blame for the decline for the first quarter. Cold and snow in the US have slowed down some projects, and heavy rains in Australia have delayed drilling there as well.  Thomson Reuters has a detailed internal research audio-video highlighting more of the risks for the oil services sector.

Second, political unrest in Libya and elsewhere in the Middle East and North Africa is slowing work there. Third, the delay in restarting drilling in the US Gulf of Mexico is having an impact as well.

Fourth, the rising price of crude, and ultimately gasoline, is causing consumers to drive less. We saw this effect back in 2008 when gasoline prices rose to levels equal to what consumers are paying now. For the services companies this means that new drilling could taper off as demand falls and E&P companies cut back on new drilling.

Working in the drillers’ favor, of course, is the boom in shale gas drilling onshore in the US. That is not likely to slow down much, mainly because leaseholders have to drill in order to maintain their leases.

Based on today’s opening price and the stocks’ median price target, Halliburton’s upside is indicated at about 21%, Schlumberger’s upside is indicated at about 24%, Baker Hughes’ at about 20%, and Weatherford at about 26%. Given the number of issues weighing on estimates, it wouldn’t be surprising if these targets are adjusted downward as well.

Halliburton shares are down about -1.5% in very early trading, to $45.93, within a 52-week range of $21.10-$50.74. The Oil Services HOLDRS ETF (NYSE: OIH) is also down nearly -2.5%, to $152.67, in a 52-week range of $89.48-$167.37.

Paul Ausick

Crude Oil Stocks fell by -2.154 million barrels and inventories now sit at 333.112 million barrels; Dow Jones was expecting a drop by some -500,000 and we had penciled in a reading of up to -1 million on our own take.

Gasoline Stocks rose by 5.081 million barrels to 223.227 million barrels; Dow Jones was looking for a gain of +1.3 million barrels and we were expecting a gain of 1 to 2 million barrels.

Distillate Stocks gained +2.652 million barrels to 164.759 million barrels; Dow Jones had estimates of +600,000 barrels and as usual in distillates we had no projections of our own.

US refineries ran at 86.4% capacity versus 88% a week ago and versus Dow Jones estimates of 88%.  We were hoping for anything above 87% but we would note that the Alaska impact will be interesting to watch in the next two weeks.

We have now had three major storms hit the Northeast in just over two weeks.  There was even a report that 49 states had snow on the ground of some sort.  The big issues beyond these numbers may lie more on a regional basis for the next month.

NYMEX WTI Crude is now up by $1.08 at $92.19 per barrel.  The Oil Services HOLDRs (NYSE: OIH) is up 0.9% at $142.70 and the United States Oil (NYSE: USO) is up 0.35% at $39.02 after the DOE data.  Valero Energy Corp. (NYSE: VLO) is up 1.95% at $24.63 after the refining report.

JON C. OGG

There may be of course some seasonality and year-end issues, but the breakdown is as follows:

• U.S. Rig Count is up 6 from last week at 1700; up 480 year over year.
• Canadian Rig Count is up 176 from last week at 422; up 80 year over year.
• The US Offshore rig count is 25, up 1 from last week; down 17 year over year.

The rig count is not seeming to have much impact as energy prices and commodities are acting weak in general.  The United States Oil (NYSE: USO) fund is down just a bit less than 1% at $37.31 and the Oil Services HOLDRs (NYSE: OIH) is actually up almost 1% at $137.77.

Baker Hughes Incorporated (NYSE: BHI) is trading higher this afternoon after a Goldman Sachs upgrade to Buy from Neutral this morning.  Oil itself is trading down almost 1% at $87.60 on the day.

JON C. OGG

To say Barclays likes the oil field services sector is an understatement: “Given our strong growth expectations for the oil service and drilling industry relative to the global economy over the next two to three years, we believe the oil service stocks should command a considerable premium to the market.” That pretty well sums it up.

E&P activity in the US is expected to concentrate on conventional oil plays and the liquids-rich shale gas plays. With natural gas prices stuck at around $4/thousand cubic feet, producers are chasing the liquids which command a high enough price to pay for all the drilling. The liquids-rich gas plays in the US are the Eagle Ford shale in south Texas and the Bakken play in North Dakota and Montana.

Another wild-card in the services business is the acquisition of Wellstream Holdings PLC by General Electric Co. (NYSE: GE). GE has long supplied equipment to the oil field services companies, but this is its first go at competing with them. How serious GE is about competing in this sector could come into focus if or when it makes a bid to acquire another company. But even GE is unlikely to buy any of the five companies we’re looking at here.

Here’s a short table showing the tickers, the current price, the mean target price from Thomson Reuters, the implied upside to that target, and the 52-week trading range. We’ll have some comments on these companies following the chart.

Crude Oil Stocks fell yet again by a sharp -5.333 million barrels and ended at 340.685 million barrels.  Dow Jones was expecting only a drop  by -2.3 million barrels.  This brings the total down close to 20 million in recent weeks.

Gasoline Stocks rose by 2.4 million barrels to 217.173 million barrels against a Dow Jones estimate of +900,000 barrels.  Distillate stocks -589,000 barrels to 160.716 million barrels, in-line with a Dow Jones target of -600,000.

Refineries came mostly in-line with targets at 87.7% run rates, which compares to 87.8% expected from Dow Jones and versus 88.0% the week before.

NYMEX crude is still up this morning and trading up $0.67 at $90.49. Keep your eye on this $90 level.  If it gets much higher, the calls for $100 oil will begin to pick up steam faster than experts predicted.

The Oil Services HOLDRs (NYSE: OIH) have climbed mildly on the news to up 0.3% at $138.77 but investors may start watching that 52-week trading range of $89.48 – 139.99.  The United States Oil (NYSE: USO) is still up but has already come off highs.  The USO is trading up 0.76% at $38.58 after the news.

JON C. OGG

The DOE reported that crude oil stocks fell by a sharp 9.854 million barrels in the last week to 346.018 million barrels.  Dow Jones was looking for a drop of -2.7 million barrels, and we were only expecting a drop of -2 million to -3 million barrels.

Gasoline supplies did manage to grow by 809,000 barrels to over 214.7 million barrels, but Dow Jones was calling for a gain of 1.9 million barrels. Distillates rose by 1.094 million barrels and Dow Jones was calling for -200,000 barrels as the reading.

The Valero angle comes from the refineries, which ran at 88.0% industry-wide per the DOE data.  That compares to Dow Jones estimates of 87.2% and a reading of 87.5% last week.

Oil Services HOLDRs (NYSE: OIH) was in negative territory, but that shot up to up 0.6% at $138.00 right after the news this morning.   United States Oil (NYSE: USO) was negative before the news and its shares have popped to up 0.6% at $38.11.

Valero Energy Corp. (NYSE: VLO) is still negative on the day as the refining play and its shares are down 0.3% at $21.33.

JON C.OGG

For starters, the GDP forecast from Jan Hatzius raised expected 2011 GDP to 2.7% growth from about 2.0% growth. More importantly, it lifted its 2012 target to 3.6% growth for the year.  The firm noted that this is a shift in the growth outlook that had been in place for about 5 years.

The forecast for gold by Goldman Sachs noted a level of $1,690.00 per ounce as the next target for 2011 and peaking at $1,750.00 per ounce.  On oil, Goldman Sachs sees an average oil price of $100 per barrel in 2011 and it sees an average price of $110 per barrel in 2012.

As far as how this compares to gold and oil, oil this morning is $1,389.20 per ounce (down less than 0.2%) and NYMEX Crude Oil is trading at $86.33 (down almost 0.5%).   Calculating the implied price for the SPDR gold ETF would be $167 to $168 in 2011 and about $172 to $174 in 2012.

The US Oil ETF (USO) is harder to calculate because it has erosion and roll dates to account for.  If we were forced to imply some forward prices on the USO based upon GoldmaN Sachs’ new targets, that would come to a range of $41 to $42 in 2011 and $45 to $48 in 2012.

Again, those are subjective targets on both gold and oil and the tracking price often falls out of line in fast markets on both fund products.  Calculating the prices for ETF and ETN products like OIH, DIG, GDX, DGP, and others is very difficult because of the equity components and relative assumptions that have to be included.  In theory, those prices should all be higher than today as well if Goldman Sachs is accurate on these higher forecasts for GDP, oil, and gold.

Keep in mind that this is just one firm’s forecast, even if it is the might Goldman Sachs.  Many economists and many industry insiders have different objectives.  Some are higher, some are lower.

So far the GLD is up only marginally at $135.60 and teh USO is down about 0.5% at $37.05.

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JON C. OGG