Rod Raynovich

Record High Crude: Free Markets Meet the Cartel

Investors and Traders buy into energy sector
Gold back on track with oil, gold up $11 to end at $882; dollar is weak as ECB holds rates steady

The new alliance of energy rich countries such as Russia, VZ, Iran,SA et al combined with global investors in driving
the upward momentum of the energy trade. Iran fed the bull as oil minister Nozari said that $200 oil is not far away due to dollar weakness.

Skeptics say it is speculation driving prices but even large pension funds such as CALPERS have significant positions in commodities
especially oil, otherwise their returns for 2008 would be dismal. Momentum begets momentum. After a brief correction last week energy
stocks are on the go with most subsectors up 2-4% such as bellwether XLE up 2% to a new high touching 85:

Integrateds: COP CVX HES up ~2%
Services: FSESX SLB WFT XES up ~3.5%
Nat Gas: CHK DVN FSNGX SJT XTO up 1-2%,SWN up 3.2%.
Royalty trusts were mixed as PGH and PBR were flat and BBEP was up ~2%.

Refiners are still spooked by crude action and SUN TSO VLO all took hits so a bottom for these stocks is not at hand. However MRO was up 1.6%.
Analytical types in the industry who study fundamental data
are obviously missing the bigger picture.

On Tuesday Arjun Murti of Goldman Sachs raised oil targets from $120 to the $150-200 range for the next 6-24 mos.
Murti also said demand for middle distillates such as diesel, heating oil and jet fuel are racing up signaling tightness in global refining capacity.

Politicians rather than be seen as aloof and clueless suggested a moratorium on summer federal gas taxes offering a paltry $80 saving for
the average driver. And the immediate effect of lower rates seems to be raising oil prices.

Vikram Saxena sums it up well:

seekingalpha.com/artic...

Positions: diversified equal weighting in energy service nat gas and integrateds. New position last week-- NE.
Adding to core positions on weakness. Waiting for entry on refiners but not now.