Oil Stocks Signal Crude Prices May Rebound to Record

Strategic Insights -

Oil stocks are signaling that crude prices may rebound to a record in 2007, with shares of Nymex Holdings more than doubling since their initial public offering in November. The value of energy industry IPOs in 2006 has reached $7.4 billion, more than double that of last year. Experts predict that the benchmark price of U.S. crude oil will average $70 a barrel next year, with Boone Pickens, a hedge fund manager, predicting $72. This would set a record, surpassing the average price for New York oil futures so far this year, $66.73 a barrel.

Key Takeaways:

  • The benchmark price of U.S. crude oil is likely to average $70 a barrel next year, according to Boone Pickens, a hedge fund manager in Dallas.
  • Energy industry IPOs in 2006 have reached $7.4 billion, more than double that of last year.
  • The world's largest oil companies, Exxon Mobil, Chevron, ConocoPhillips, and Marathon Oil, are expected to reach an all-time high in earnings this year due to higher crude prices.
  • Investment strategists, including James Paulson of Wells Capital Management, previously incorrectly predicted energy markets had peaked and were poised to collapse.
  • The speed at which prices start to rise may depend on the severity of wintry weather across the United States.
  • Boone Pickens, a hedge fund manager, has correctly predicted rising energy prices for the past three years.

Statistics:

  • The value of energy industry IPOs in 2006: $7.4 billion
  • The average price for New York oil futures so far this year: $66.73 a barrel
  • The 2005 average price of U.S. crude oil: $58.70 a barrel
  • The highest price reached by U.S. crude oil in July: $78.40 a barrel on the New York Mercantile Exchange
  • The percentage drop in crude oil prices this month: up to 30%
  • The percentage increase in natural gas futures since September: almost doubled

Sources:

  • [Source: "Oil Stocks Signal Crude Prices May Rebound to Record" by Matthew Leising, New York, no date provided]
  • [Source: Boone Pickens, hedge fund manager in Dallas, no date provided]
  • [Source: Lehman Brothers, no date provided, interview with economist Ed Morse]
  • [Source: Grove Creek Asset Management, interview with David Foley]
  • [Source: Wells Capital Management, interview with James Paulson]
  • [Source: Nymex Holdings, no date provided]
  • [Source: KBR, no date provided, IPO announcement]