Advisor Login Contact Us

Future Oil Worries, Despite Surging Energy Shares.

Equites rallies yesterday as energy shares surged, a surge predicated by a 5.8% jump in crude.  For the month of April, energy shares in the S & P 500 have gained 6.8%, on track for the best month since January 2013 according to Bloomberg.

The negative oil narrative still exists even though prices are up almost 30% since their mid-March lows and prices are currently at 2015 highs, close to the $60 quarter end price target that OPEC and Saudi Arabia projected about three weeks ago.  For all the stated reasons for yesterday advance—falling dollar and oil production and Iranian discord—a possible supply disruption was not discussed as a possible catalyst for the increase.

There were ample stories of Iraqi refineries burning, Yemeni fighting, chaos in Libya, etc. but as stated above none of these events were suggested as a possible reason for rising crude.   Can I rhetorically ask is the accepted market narrative missing a distinct possibility of occurring given that all did not suggest oil would fall 50% in six months?

It is my first-hand experience when all fail to suggest something will occur, consensus will then adopt the inverse narrative perpetuating the unexpected narrative for almost forever.

What will happen today?  The earnings parade continues, results of which is meeting much dumbed down expectations.  As expected most companies have commented about the rising dollar and the impact upon results.

Last night the foreign markets were mixed.  London was down 0.30%, Paris down 0.49% and Frankfurt down 1.47%.  Japan was up 0.08%and Hang Sang up 0.44%.

The Dow should open moderately lower as 14 S & P 500 companies post profits today.  The consistency of the few releases to date is the effect of the dollar.  Will today’s narrative be much of the same.  I also ask will the Greek narrative reemerge?  A year ago if today’s headlines were printed about Greece, the markets would be facing considerable volatility. The 10-year is up 4/32 to yield 1.88%.

Return To Index Page
Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.