Oil Market Self-Corrects, Oklahoma State Stocks Make Comeback

By Jerry Shottenkirk

Markets made a correction Tuesday, according to local energy industry insiders.

Experts have claimed the price of crude oil is much too high, and over the past two days it has headed in the reverse direction.

“We had an awful lot of forward trading that indicated people were convinced that oil was going to keep going up, up and up, and this is a fairly strong correction,” said Bruce Bell, chairman emeritus of Mid-Continent Oil & Gas Association of Oklahoma. “Hopefully we’ll knock some of the speculators out of the equation and we’ll get more reasonable oil prices.”

Oil dropped another $5.33 and settled at $136.04 per barrel, a day after losing $3.92 per barrel. For the week, the commodity is down $9.25.

State oil and gas stocks dropped sharply early in the day but most made up a great deal of ground by the end of the session.

Bob Rader, senior vice president of Capital West Securities, said the stock market responded to the commodities exchange.

“What had happened is that so many of these energy stocks over the last month have been almost at a vertical climb, and it got to the point that with oil starting to come down in price, there was some profit-taking by traders,” Rader said. “The stocks took a pretty good hit this morning.”

Continental Resources was down nearly 12 percent in the early going but closed with a rush and finished at $63.36, down 23 cents, or 0.35 percent.

Panhandle Oil & Gas, which closed at $32.22, up 10 cents, or 0.31 percent, and Quest Resources, which closed at $10.15, up 22 cents, or 2.22 percent, ultimately were winners on the day among state oil and gas stocks. For most stocks, what started as a bad day turned better.

Bell said energy is at a point where some of the movement seen Tuesday will become more regular.

“I think you’re going to see some of the top move off and obviously the prices of our local oil and gas businesses are going to moderate somewhat,” Bell said.

Oil topped out at an all-time high of $145.85 last week.

“Our problem on a longer-term basis is we have a deficiency of supply, and even at $145 demand is not off dramatically,” Bell said. “We are seeing gasoline demand dropping because people are starting to drive less. We finally got to the price of gasoline that has some real effect on peoples’ habits.”

Not all of the energy action is U.S.-centered.

“When you look at worldwide use of crude oil, we are still increasing, not decreasing, and our supply is not increasing as rapidly as our demand is,” Bell said. “We continue to be in the situation where we are not having oil shortages, but we are certainly having areas in which it’s more difficult to get as much light sweet crude as you want.”

He said much of the oil currently processed is heavy oil and sour oil.

“We don’t generate the products out of the heavier or sour oil as easily as we do with light sweet crude,” he said. “We still have this fundamental problem and the price of oil is going to remain much higher than what we’re used to historically. I don’t think anyone knows what the number is, but it’s going to stay high until we increase supply or decrease demand, and neither of those things seems to be happening.”

The attention oil and natural gas have received has caused plenty of movement on Wall Street, Rader said.

“Oil and natural gas have been getting a lot of publicity,” he said. “Boone Pickens was on ABC, CNBC, and USA Today (on Tuesday) talking about it. I still think there’s going to be a demand for oil and a big demand for natural gas. These Oklahoma companies are going to continue to do all right. There are days when prices come down, but if you’re in for the long haul, you can find great companies right here.”

Originally published by Jerry Shottenkirk.

(c) 2008 Journal Record – Oklahoma City. Provided by ProQuest Information and Learning. All rights Reserved.