eNergy Stocks: West Texas Oil Falters in Its Role As a Benchmark

The mighty Texas crude-oil benchmark -- the per-barrel price watched obsessively by the markets and quoted by the media -- has diverged so drastically from prices of other grades of crude in recent weeks that some market participants are calling it a "broken benchmark."

Several factors have combined to push the price of West Texas Intermediate crude oil -- used as the basis for the world's most widely traded energy contract -- dollars below other desirable, so-called light sweet crudes.

On Friday, for example, the bellwether oil contract on the New York Mercantile Exchange closed at $63.38 a barrel.

an energy stock trader, mondat outlook
by Zman (zmansenergybrain.com)

Earnings of interest:

  • April 23: Arch Coal Inc. (ACI), Grant Prideco Inc. (GRP)
  • April 24: ENSCO International Inc. (ESV), Pogo Producing Company (PPP)
  • April 25: ConocoPhillips (COP), EnCana Corp. (ECA), Range Resources Corp. (RRC), Smith International Inc. (SII), XTO Energy Inc. (XTO)
  • April 26: Apache Corp. (APA), Evergreen Energy (EEE), ExxonMobil Corp. (XOM), Halliburton Co. (HAL), Newfield Exploration Co. (NFX), Nexen Inc. (NXY), Potash Corp. of Saskatchewan Inc. (POT), Tidewater Inc. (TDW)
  • April 27: Chevron Corp. (CVX), Cooper Cameron Corp. (CAM), W-H Energy services Inc. (WHQ)

Last week wasn't so go for the commodities or the stocks:


Nigeria Watch: Pitiful excuse for an election -- no surprise in its outcome. I'd be surprised if some parts of the populace don't rise up and trash scattered oil infrastructure facilities and/or take more hostages. The new president elect, Umaru Yar'Adua, is the guy I think you wanted in terms of settling the country down and instituting reforms, but with widespread fraud and violence during the elections it will take some time before things change.

Holdings Watch: Storm Cat Energy (SCU) -- breaking out. They speak at 2:25e today at IPAA.

Analyst Watch: Valero Energy Corp. (VLO) increased to buy at Goldman Sachs; Tesoro Corp. (TSO) cut to hold at FBR; XTO Energy Inc. (XTO) and EOG Resources Inc. (EOG) cut to hold at Citigroup -- this is the 5th consecutive day Citi has targeted a group within the energy sector for downgrade. XOM and COP cut to hold at Deutsche Securities. HSBC trims price target on Arch Coal Inc. (ACI) but boosts it on Peabody Energy Corp. (BTU), CONSOL Energy Inc. (CNX) and Massey Energy Company (MEE).

USO Follow up: ETF analysts and others say the vast underperformance of United States Oil Fund ETF (USO) to WTI is primarily attributable to contango and not expenses or investments straying from the benchmark. As the fund continually rolls forward into higher prices out month contracts near each expiry, it is getting further and further behind its benchmark. So, if oil futures are normally in a state of contango -- why buy and hold USO? Trade it? Sure. But buy and hold? Nope -- it's built to lose. If the oil futures ever get back into backwardation, maybe you'd want to be in. But then that would mean oil is expected to fall, right?

Shame On You Watch: Two weeks ago (or so) I took some flack for my treatment of the second Iran hostage "crisis." I actually took it for adding the quotes to the word crisis. Well here's a story for you.

Alaron Watch Day 4: Alaron price targets $68 crude and $4 gasoline. This morning June crude opens just under $64 gaining $1.50 from contract expiry. The nationwide average price for retail gasoline is $2.87 per gallon. Phil Flynn of Alaron did say $4 /gallon "somewhere in the U.S." A San Francisco station set the record last well hawking gas for $3.37 per gallon. Here's a Bloomberg story that will warm Alaron's heart.

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