The oil stocks are saying sell, sell, sell. They are saying this move up to %50 is another phony move and that we should pay no attention to whatever OPEC is saying.
I tend to want to go with the oil stocks.
Now, one this is for certain. This whole move up is done without any real substance. There has been no new cutback. There has been no sense that there's been a pick-up in demand. Sure, there are stats that show a bit of a drawdown of our inventories, but that means nothing.
What matters is that our rig count is going up and each rig means a lot more than then it used to. We are simply pumping too much oil to give these stocks a lift from here.
That said, there are ridiculous anomalies that are presenting themselves that have to be paid attention to. Case in point: Halliburton (HAL) is at $47 up from $29 in February of 2016 when oil had its massive break. But Action Alerts PLUS charity portfolio holding Schlumberger (SLB) is at $71, only $10 above its level from the crash.
In what world is Halliburton that much better a company than Schlumberger that it is doing better than SLB at this point?
Exxon (XOM) at $82 is only $9 above where it bottomed. But Chevron (CVX) at $106 is $28 points above where it stopped going down.
These are terrific anomalies that I just can't explain. They tell me there is little rationality to the prices of these oil and oil service companies right now.
Is it opportunity? I think that the fact that the oil stocks failed to go up from the get-go this morning with crude up $0.40 tells you that upside from here, barring an event, is limited. We went too far on the same news. OPEC did it again and talked us off the $46 ledge, but it didn't fool the owners of the big service or oil stocks.
We own a bunch for Action Alerts PLUS, stocks like Apache (APA) , where a board member just bought $513,000 dollars' worth of stock and the quarter showed that the worries about its Alpine High find are vastly overblown. We can't sell here.
But the majors? I think that Chevron is just too darned high vs. Exxon. I think that HAL makes no sense vs. SLB.
So, I would adjust. And be ready for the fall that the stocks are telling you is going to happen without some sort of news event that is quite unforeseen at the moment.
