Energy futures are now the hottest sector on Wall St. Some are calling energy stocks the new ?tech bubble?, with all sorts of speculative players leaping into the market. Oil, for example, is trading about 70% higher than it was a year ago. This despite the fact that global supply is still adequate to meet demand. Fund managers are worried, though, that any significant new disruption of supply -through terror attacks, war, or more hurricanes -could really throw a monkey wrench into the global economy. Another lingering worry among analysts is the world"s limited excess capacity, or supply buffer, which is hovering at only 1 percent above daily global consumption of 82 million barrels. Suddenly, everyone is trying to hedge their energy bets!
"In our judgement, oil doesn?t belong where it is," says energy analyst George Caspar. "That doesn?t mean that it can?t go up from here," he adds, "because the market seems to want it to go up."
Caspar works with Robert W. Baird & Co. out of Milwaukee, and on the natural gas side of the equation, he sees the majors moving on to hunt for bigger fish in the mid and far east, leaving independents to work on finding more domestic supply. Which they are doing but, he says, "the decline curves are getting more severe, so that may be one of the critical points influencing prices, But if gas stays above the $6 level it?s going to be very profitable to accelerate drilling activity," he notes. "What?s happening in gas is going to encourage increased drilling, particularly in CBM."
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