If oil is up why r my energy stocks down?

C

chrismontez

I still think oil is a good play, but always wonder why my energy stocks like VLO and COP often drop on days like today when oil goes up. I would think rising prices would offset rising costs associated with oil use for them and help push the stock higher.

But... economics has never been my strong suit.
 
Apparently the "smart" money feels the recent speculative surge in crude oil is not sustainable and they are using the day to take profits. If you look at today's EIA stats, there is certainly a dropoff in demand, so these crude prices are going up on pure spec. Also VLO is a refiner, and its margins can get squeezed as its input costs (crude) rise sharply.
 
Son, because stocks are set to have a good sharp pullback here, there is no more dumb money left to buy your stocks now. Lessons learned the hard way.
 
Quote from chrismontez:

I still think oil is a good play, but always wonder why my energy stocks like VLO and COP often drop on days like today when oil goes up. I would think rising prices would offset rising costs associated with oil use for them and help push the stock higher.

But... economics has never been my strong suit.
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Look at XOM. 50% of it's business is outside the US. It makes money as the dollar drops. I haven't checked this out, but they may account for part of the differences. Notice that VLO sells only to Canada and the US mkts I believe.
 
Quote from Chartiste:

Apparently the "smart" money feels the recent speculative surge in crude oil is not sustainable and they are using the day to take profits. If you look at today's EIA stats, there is certainly a dropoff in demand, so these crude prices are going up on pure spec. Also VLO is a refiner, and its margins can get squeezed as its input costs (crude) rise sharply.
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Noticed a selloff in some of my energy holdings too. I am thinking it may be "smart money" as well - but right now I remain 'dumb money' so still long. Wait and see.
 
"Son, because stocks are set to have a good sharp pullback here, there is no more dumb money left to buy your stocks now. Lessons learned the hard way."

Well that's a buy sign if ever I heard one. I just added to my GSF calls that I'm up $420 on.
 
Because oil stocks do not correlate 100% with the spot price of oil. They are also correlated to the general stock market, and a few other factors e.g. business conditions in the oil sector, wage rates, and so on.

If you want to profit directly from price rises in oil, then you should buy oil futures, not oil stocks. Only buy oil stocks if you are bullish on oil *and* stock prices in general, or if oil stocks are pretty cheap relative to future oil prices.

It's nothing to do with smart money. If smart money was selling oil, then the oil futures would go down at the same time as oil stocks.
 
Yea I know it's not a direct correlation and I follow DIG and DUG when I want to look at oil more directly. I know that my COP stock price is more effected by earnings, announcements, market etc... than by oil. It just seems to me that on days that I see oil is spiking, energy/oil related stocks in general often drop. I thought it was food for thought.
 
"Son, because stocks are set to have a good sharp pullback here, there is no more dumb money left to buy your stocks now. Lessons learned the hard way."

Well DAD. whenever a boob tells me to sell I buy and I'm up a tidy sum on the GSF calls I bought. Feel free to post anytime with your recommendations.
 
Quote from chrismontez:

I know that my COP stock price is more effected by earnings, announcements, market etc... than by oil. It just seems to me that on days that I see oil is spiking, energy/oil related stocks in general often drop. I thought it was food for thought.
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I bought COP recently for a trade and it seems to have an odd correlation with the NASDAQ of all things. Haven't run numbers to see if it is real.




:confused:
 
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