The ups and downs of the government’s attempts to get a bailout package for financial institutions is leading the major players in the oil patch to remain really quiet. Given the yelping not so long ago about the ban on offshore drilling, you might expect some gloating and even some boost in share prices given Congress’s decision to let the federal ban expire. Neither is happening.

Crude oil spot prices are off about $2.50/barrel today, and the price tracksclosely to the prospect of a deal on the proposed bailout. When thebailout looks imminent, crude prices rise because traders see that asan indication that the global economy will perk up. When bailoutprospects look dim, as they do this morning, crude prices fall becausetraders don’t expect consumption to rise.

In the past month, the share price for Exxon (NYSE:XOM) has moved from$79.95 to $80.67 yesterday. In between, the stock touched a high of$81.18 and a low of $73.25. That’s a gain of about 1%. Chevron(NYSE:CVX) has gained about 2% in the same period, and ConocoPhillipshas lost about 6%.

E&P companies have done a little worse. Apache (NYSE:APA) is offabout 1% for the month, Devon (NYSE:DVN) is off about 3%, and Anadarko(NYSE:APC is off more than 10%. All three are down another 5%-6% today.

On the NYMEX, open interest in the November contract is about 285,000.Through March 2009, the market is backwardated (barely), furtherindicating some lack of faith in the economy’s ability to recover.

Things could change quickly, as they have been doing for the past fewweeks. But if the futures price of crude continues to fall, the growthoutlook for oil patch stocks is going to dim.

Paul Ausick
September 26, 2008

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