Starting last fall, it became clear even to casual industry observers that large oil and gas inventory overhangs weren't going to bode well for commodity prices and energy-stock valuations going into 2007. Then came the second consecutive milder-than-normal January and their expectations were fulfilled. The heady $78-plus oil markets of last August yielded to crude prices in the low $50s while gas-futures, in double digits last summer, dipped to below $6. Meanwhile, energy-stock values plunged 10% to 15% and even more. Does this signal the end of the bull market in energy? Buysider consensus about this is best summed up in Bette Davis' oft-quoted line from All about Eve: "Hold on to your seats, fellas; it's going to be a bumpy ride." Translation: the early part of 2007 is going to be marked by high volatility and softness in the commodity markets, with oil prices trading in a broad range of $48 to $65 and gas prices moving in a band of $5.50 to $7. Ultimately, however, as more momentum players exit the energy-stock playing field and more traditional oil and gas investors again become dominant, the energy-ticker tide on the corner of Wall and Broad streets will gradually begin to rise. For more on this, see the March issue of Oil and Gas Investor. For a subscription, call 713-260-6441.
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