Join        Login             Stock Quote

I'm Selling 150 Shares Of This Major Oil Stock

 April 03, 2012 12:34 PM

In late February, energy stocks started to perk up as oil easily moved past the $100 per barrel mark. Rising tensions with Iran were seen as the big factor, but an improving U.S. economy also changed the calculus for many investors. As U.S. consumers start to spend more freely, they have been expected to burn more gasoline. Emerging economies have already been consuming ever more energy, and with little spare global oil production capacity, extra demand from the United States threatened to push oil higher, as was the case in late 2007 and early 2008.

That's why I decided to add Marathon Oil (NYSE: MRO) to my $100,000 Real-Money Portfolio. That move was aimed at providing exposure to the energy sector, which showed signs of an imminent upward move.

Yet in the last six weeks, a curious trend has emerged. Whether it's because we're driving more efficient cars, or $4 gasoline is causing us to drive less, we're actually seeing a drop in gasoline consumption. And this is setting the stage for an oil glut. In the week beginning March 26, we learned that U.S. stockpiles of crude oil rose 7.1 million barrels last week to 353.4 million barrels, a seven-month high.

Adding insult, many oil producers are also natural gas producers, as the same energy field often produces both energy sources. So as drillers were poking new holes in the ground to profit from $100 oil, they have also been pulling up a lot of natural gas. As a result, natural gas prices are falling even further (with natural gas price futures dropping for the sixth straight session as I write this), and may soon breach the $2 per thousand cubic feet (MCF) level.

Right now, gas producers should be rebuilding depleted reserves after a typical winter drawdown. Instead, there is currently 58% more gas in storage than usual for this time of the year, according to the U.S. Department of Energy. At current prices, look for many drillers to offer downbeat guidance in the coming earnings season.

The fact that crude oil remains above $100 a barrel helps offset some of the pain of plunging natural gas prices.

Next Page >>12


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.