05/31/08 - 10:33 AM EDT
Kevin Baker "> Kevin Baker Last Thursday, the price of Light Sweet Louisiana crude oil opened for trading at $135.10 per barrel and a week later closed 3.13% lower at $130.87.
The funds we follow that track the energy and natural resource sector responded, slipping an average of 2.48% (excluding the funds shorting the sector) for the four trading days ending Thursday, May 29.
On the shrinking demand side of the equation, the U.S. Energy Department reported fuel consumption down 0.7% from the same 4 week period in 2007 at an average of 20.5 million barrels a day through May 23. MasterCard concurred, as its measure of gasoline demand shrank 5.5% for the week. Pain at the pump from $4 per gallon gasoline may finally be impacting driving habits.
On the other side of the planet, India's Finance Minister disclosed that prices, fixed by their government, would have to be increased to avoid upwards of $50 billion in losses at their state-run oil companies. Reduced Indian fuel subsidies would be one more factor restraining the quantity of oil demanded. Also, Nigeria boosting daily production by 8% should help a little on the supply side.
In a brush-back pitch to energy speculators, the U.S. Commodity Futures Trading Commission announce a wide-ranging investigation to find out if market manipulation can be blamed for the record $135 per barrel oil. The overt action is likely also an attempt to preempt Congress from imposing new regulations on energy trading.
In testimony to the U.S. Senate, a Royal Dutch Shell(RDS.A - Cramer's Take - Stockpickr) executive placed the justified price of oil between $35 and $65, while a ConocoPhillips(COP - Cramer's Take - Stockpickr) executive thought $90 was fair value.
Four of the 10 worst-performing funds focused on alternative energy, with two solar energy funds having the darkest week.
The Market Vectors Solar Energy ETF(KWT - Cramer's Take - Stockpickr) lost 10.45%, while the Claymore/MAC Global Solar Energy Index ETF(TAN - Cramer's Take - Stockpickr) gave up 7.81%.
For both funds, the same three companies did most of the damage. The Norwegian Renewable Energy Corp AS(RNWEF - Cramer's Take - Stockpickr) shed 20.91% while German companies Q-Cells AG(QCLSF - Cramer's Take - Stockpickr) and Solarworld AG(SRWRF - Cramer's Take - Stockpickr) shrank 18.83% and 14.15%, respectively.
The selloff in solar energy stocks came from panic selling in anticipation of subsidy cuts by the German government. By the time of writing, the coalition of parties running Germany agreed on smaller-than-expected subsidy cuts, prompting a rebound in these shares.
The exchange traded fund tracking 200% of the Dow Jones U.S. Oil & Gas Index, the Ultra Oil & Gas ProShares(DIG - Cramer's Take - Stockpickr), leaked 6.40% of shareholder value. Global Industries(GLBL - Cramer's Take - Stockpickr), off 9.90%; Delta Petroleum Corp(DPTR - Cramer's Take - Stockpickr), off 9.37%; and Denbury Resources, off 8.55%, were the holdings giving up the most ground this week. The Denbury loss was on heavy insider selling.
While the discovery will do nothing for oil supplies over the next decade, Brazil's discovery of the potentially 8 billion-barrel Boe Tupi field and the 33 billion-barrel Carioca field can immediately brighten the fortunes of a few index members.
Petrobras(PBR - Cramer's Take - Stockpickr) may call upon the services of offshore contract drillers such as Diamond Offshore(DO - Cramer's Take - Stockpickr), National Oilwell Varco(NOV - Cramer's Take - Stockpickr), and Transocean(RIG - Cramer's Take - Stockpickr). Over the next 10 years, Petrobras is expected to award contracts totaling as much as $100 billion to develop the new fields.
| Worst Performing Energy & Natural Resource Funds for the Week Ending Thursday May 30 | ||||||
| Fund | Ticker | Rating | Fund Type | 1 Week Total Return | ||
| Market Vectors Solar Energy ETF | KWT | U | ETF | -10.45% | ||
| Claymore/MAC Global Solar Energy Index ETF | TAN | U | ETF | -7.81% | ||
| Ultra Oil & Gas ProShares | DIG | B+ | ETF | -6.40% | ||
| United States Heating Oil Fund LP | UHN | U | ETF | -6.35% | ||
| Claymore/SWM Canadian Energy Income Index ETF | ENY | U | ETF | -5.89% | ||
| Market Vectors Global Alternative Energy ETF | GEX | U | ETF | -5.27% | ||
| Guinness Atkinson Funds - Alternative Energy Fund | GAAEX | U | Open-End | -5.19% | ||
| ProFunds Oil & Gas UltraSector ProFund | ENPIX | B | Open-End | -4.79% | ||
| PowerShares Dynamic Energy Explo & Prod Portfolio | PXE | B+ | ETF | -4.45% | ||
| iShares Dow Jones US Oil & Gas Expl & Prod Index | IEO | B+ | ETF | -4.31% | ||
| Source: Bloomberg & TheStreet.com Ratings | ||||||
The best performing energy or natural resource fund this week is the MACROshares Oil Down Tradeable Trust(DCR - Cramer's Take - Stockpickr). Even after the rebound of 12.61%, the fund has lost 92.48% of its value in the last year. This fund is inversely tied to the price of light sweet crude traded on the NYMEX.
Just 19 months after inception, this fund and MACROshares Oil Up Tradeable Trust(UCR - Cramer's Take - Stockpickr), which just reached a combined $1 billion in assets under management, will both cease trading on June 25 and be liquidated due to hitting an early termination trigger.
In second place, the UltraShort Oil & Gas ProShares(DUG - Cramer's Take - Stockpickr) rode its 200% negative leverage to the Dow Jones U.S. Oil & Gas Index to a gain of 6.07%.
The best-performing fund of those making bullish bets on natural resources is the E-rated Fidelity Select Paper & Forest Products Portfolio(FSPFX - Cramer's Take - Stockpickr) returning 3.44% for the four trading days under review.
The three largest holdings are Weyerhaeuser(WY - Cramer's Take - Stockpickr) at 9.6% of assets, Temple-Inland Inc(TIN - Cramer's Take - Stockpickr) at 8.2%, and Domtar(UFS - Cramer's Take - Stockpickr) at 7.7%.
Domtar shares led the way, up 10.77%. The only holding doing better was Smurfit-Stone Container(SSCC - Cramer's Take - Stockpickr), whose shares rose 11.49% on its ability to raise prices for containerboard.
| Best Performing Energy & Natural Resource Funds for the Week Ending Thursday May 30 | ||||||
| Fund | Ticker | Rating | Fund Type | 1 Week Total Return | ||
| MACROshares Oil Down Tradeable Trust | DCR | E- | ETF | 12.61% | ||
| UltraShort Oil & Gas ProShares | DUG | E- | ETF | 6.07% | ||
| Fidelity Select Paper & Forest Products Portfolio | FSPFX | E | Open-End | 3.44% | ||
| ProFunds Short Oil & Gas ProFund | SNPIX | U | Open-End | 3.23% | ||
| Kayne Anderson Energy Development Co | KED | U | Closed-End | 3.10% | ||
| Tortoise Energy Infrastructure Corp | TYG | C- | Closed-End | 1.91% | ||
| PowerShares WilderHill Progressive Energy Portfolio | PUW | C- | ETF | 1.50% | ||
| Fiduciary/Claymore MLP Opportunity Fund | FMO | C+ | Closed-End | 1.12% | ||
| United States Gasoline Fund LP | UGA | U | ETF | 0.81% | ||
| Kayne Anderson MLP Investment Co | KYN | B- | Closed-End | 0.75% | ||
| Source: Bloomberg & TheStreet.com Ratings | ||||||
Today, the Ministry of the Economy for the world's second largest importer, Japan, reported that, in April, its country imported 137 million barrels of oil. That's a 20.9% increase over April 2007.
Foreign markets taking up any slack in U.S. oil demand and the return to the major downward trend in the U.S. dollar due to inflationary pressures keep me bullish on oil and other natural resources.
In my May 3 sector of the week article on energy funds, I called their weak performance "an attractive, buy-on-the-dip entry point for energy." After advancing more than $20 a barrel before the latest pull back, this too looks like a short-term dip.
