Energy Stocks Continue to Lag Crude Price Gains

With oil now trading above $92 a barrel, the commodity is up over 50% for the year. Oil stocks, however, haven't fared as well. So far this year, the group is up a very respectable 26%, but when compared to the commodity, the move seems conservative. Since the end of the Summer, the divergence is even more pronounced. Crude has risen 25% since Labor Day while the S&P 500 Oil and Gas group is up just 10%.

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One would assume that either oil is likely to correct or oil stocks will play catch up, given that the ratio between the two (oil stocks/oil) is now at its lowest levels in over a year. However, the chart below showing the ratio between the S&P 500 Oil and Gas group and the price of oil highlights that the recent decline has merely brought the relationship back down into its normal range.

Therefore, while many expect the recent divergence to cause a move down in oil or up in oil stocks, a more likely scenario could be that the two simply trade in tandem.