Market Overview

All The 'Experts' Were Wrong On Oil

All The 'Experts' Were Wrong On Oil

Transocean LTD (NYSE: RIG) shares were up nearly 11 percent on Wednesday. The gain comes thanks to a government report that revealed crude oil supply rose significantly less than analysts expected last week. The rationale for the upward price move is this: Smaller-than-expected supply growth lowers the downward pressure that had existed in the oil market.

WTI crude oil prices are up 4.9 percent on the day, followed by Brent prices, which have gained 2.3 percent. The United States Oil Fund LP (ETF) (NYSE: USO) has risen 4.5 percent.

According to Tim Anderson of MND Partners, "Right now, Oil is on the verge of breaking above a crucial near term resistance level that could spark a $6 to $10 rally into the mid to high $60s." WTI last traded near $56 a barrel.

Related Link: Oil Stocks Are Surging

"Stocks have been testing upside resistance also, and don’t be surprised if a sharp move higher in oil sometime in the next few weeks is the catalyst for stocks breaking out of their range to the upside resulting in fresh all-time highs. Don’t fret the economists and market strategists. If it plays out that way, they’ll have a perfect explanation for it," Anderson added.

From a technical standpoint, he noted the near perfect -- in his opinion -- "W" bottom in the Market Vectors Oil Services ETF (NYSE: OIH).

All The 'Experts' Were Wrong On Oil

He also explained what many experts missed.

"Since last fall when it became clear the decline in Oil prices would be much more severe and long lasting than anticipated," he said, "we've heard from esteemed economists and market strategists...that an oil price decline of this magnitude would be a boon for consumer spending, and thus the economy."

Anderson said the economy is still waiting.

Citing Tuesday's report on retail sales, he noted how March figures showed "fractional improvement" compared to February's "deep freeze." That's nowhere close to what economists had projected 4 to 5 months ago if oil traded in the $50 range, he added.

Other Movers

Plenty of other oil plays are moving on Wednesday.

Drillers like Ocean Rig UDW Inc (NASDAQ: ORIG) and Vantage Drilling Company (NYSE: VTG) were up double-digits, while oil servicers including Halliburton Company (NYSE: HAL), Schlumberger Limited. (NYSE: SLB) and Baker Hughes Incorporated (NYSE: BHI) were all up at least 3 percent.

Refining and marketing giants Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), BP plc (ADR) (NYSE: BP) and Royal Dutch Shell plc (ADR) (NYSE: RDS-A) rose at least 1 percent through early afternoon trading.

The Brazilian Petroleo Brasileiro Petrobras SA (ADR) (NYSE: PBR) rose more than 6 percent, but other factors appear to be partially responsible for the rise.


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