Its All about Oil, Again

Oil has caught a bid and is now trading well above $83 per barrel for winter month delivery.  At these prices, the energy equity market vs the oil market tells me that either Oil is very, very over priced... or energy equities are very, very underpriced. Given the Fed's absolute determination to QE (destroy the US$) our way to recovery, we can't even count on the other nations killing their currency equally.

The American economy is not the driver of energy company earnings - Oil prices, and to a lesser extent Nat Gas, are. And yes, I know Nat Gas has been murdered... my sense is that a lot of that has to do with an outrageous access to credit for the Gas producers and drillers - especially the smaller and marginal players.  Frac-Gas costs over $6 per mcf to produce, and Nat Gas front month is in the mid $3's... believe me when I tell you there will be bankruptcies in that space and that the market will force these dopes out of the market.

If Oil holds up and Nat Gas stops getting killed, energy equities will out perform by a wide margin.

This not a recommendation.  Just an observation.  Energy prices could head south, and if they do, energy equities will NOT be cheap.

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Oil imports into the U.S. have fallen 3.5% so far this year when compared to this date in 2009 - total petroleum imports are now under 10mm bpd.  TOTAL world oil exports, that is Oil being sold internationally by the Oil exporting nations, has fallen over 5% since 2005.  Meanwhile, world population has increased by nearly 6% during that time.  The rest is fairly self-explanatory.