Obama's transition team co-chair, John Podesta, called drilling for oil and gas on 360,000 acres of BLM land in Utah "a mistake". Could President Obama reinstate the executive order against offshore drilling that was only recently rescinded by his predecessor?
According to the Monday morning market, the oil supply/demand balance is shifting in favor of the energy bulls. Crude oil was up more than 4%, and natural gas was up 6%.
Worldwide fiscal stimulus, including China's new $586 billion plan, are also bullish for commodities. Copper was up 10% in early trading, and miners are top performers in the global markets today. Precious metals are up as well, even though the dollar is firm versus the euro.
Commodity insiders are back as well. Since Friday morning insiders have reported purchases in the oil &gas (NBL), coal (HW, PCX), chemicals (CEM), paper/forest products (BKI, PCH, TIN), building materials (EGLE, WCC) and steel (AKS, CMC, ZEUS).
Barron's editors may have also sensed a turn. Last weekend's featured interview was with Donald Coxe of BMO Financial Group, who is "convinced we are in the midst of the greatest commodities bull market of all time." Coxe favors the food play, including fertilizer and tractors (CNH). He also likes the diversified resource giant BHP Billiton (BHP).
Of all these commodity plays, with a recession-mired 2009 ahead, perhaps the best commodity asset is oil (USO). USO does not need new near-term demand. It could rebound simply on supply restrictions. Not only will the new White House be hostile to drilling, but the early test of Obama's leadership that was predicted by his own VP a month ago, could threaten oil supplies as well.
I am bullish on USO long-term, but am not confident that oil and gas equities will perform. Offshore producers will be denied the low hanging fruit once again. While higher oil prices are likely to boost corporate top lines, windfall profits taxes could negate any gains for the E&P shareholder.
Stock position: None.
