Is the Cushing bottleneck about to end? Is this colossal error of oil infrastructure, where oil almost automatically goes to the Cushing hub, being solved?
That's what people seem to be betting. We have a huge run in West Texas, which seems to be joining Brent after being bottled up and having to be sold at a discount to the rest of the country.
This anomaly is skewing things because the oil stocks themselves are trading off of Brent, which is going down while WTI is going higher.
What a screwed up world we have, because if WTI were down then oil stocks would be going down, too. The oil stock market seems to take its cue from whatever contract is down and -- if both are up -- then, and only then, the stocks go higher.
You know how I feel. Oil stocks are the cheapest I haves seen in some time despite rampant takeovers and a belief that China is buying so much oil that you can't expect a big break in oil if we haven't had one yet, especially given the weakness in Europe.
Think about it. Brent's still at $110 after Libya's been solved and is starting to get back on line, after Iraq is pumping about 50% more than it was a year ago and Canada and the United States are pumping much more than they were a couple of years ago.
But because the oil service companies were very conservative, as is there wont, we end up with oil stocks going down.
I would buy them ahead of when Exxon (XOM) reports Thursday.
Random musings: We have a number of excellent Action Alerts PLUS emails out today, including a follow-up of our call that you should sell Cummins (CMI) into the quarter, a very good heads up considering.