Two weeks ago, we noted energy stocks appeared to be breaking out of a multi-year trend of underperforming oil and gas prices on both rallies and dips. That trend has solidified since.
Oil has continued to slide. The market disruption that pushed the expiring May futures contract into negative territory has eased. But benchmark WTI Cushing is at a low to sub-teens price per barrel. Crude from Alaska, the Bakken and Canada has been trading under $10, and global benchmark Brent has periodically broken under $20.
The price of natural gas has been somewhat more stable. But after a mild winter in most of North America, benchmark Henry Hub is still well under $2 per thousand cubic foot. Gas at Canada’s AECO and Appalachia’s Marcellus is mired in the $1.50 range, too low for many producers to be profitable.
Nonetheless, since the April 17 EIA went to post, the S&P 500 Energy Sector Index is actually higher by nearly 6 percent. The super majors-focused NYSE Arca Oil Index (NYSE: XOI) is up even more at 7 percent plus. And the midstream-heavy JP Morgan Alerian MLP Index ETN’s (NYSE: AMJ) has increased by nearly 14 percent.
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Elliott and Roger on Oct. 29, 2020
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