Energy Still Has Juice

Crude oil futures are again up today for the third day in a row to a new record high of nearly $123 a barrel, partially because of weakness in the U.S. dollar. There are also continued concerns that the production disruptions in Nigeria, Africa's largest producer, will limit supplies. There have been continued militant attacks on an oil transfer facility in the country that forced Royal Dutch Shell (RDS.A - commentary - Cramer's Take) to reduce its output. However, you don't have to worry -- the political candidates are coming to the rescue!

I am not a bit surprised to find that the presidential candidates are trying to impress American consumers into thinking that cutting the gas tax would increase demand, thereby pushing the price back to previous levels.

To be totally realistic, cutting the gas tax would do little or nothing to cut gas prices in the short run and would do nothing to provide positive incentives for energy conservation in the long run. The only beneficiaries to a cut like this would be the producers and refiners, and that certainly does not benefit the consumer. You would think that these candidates' economic advisers would understand something as simple as supply and demand.

Speaking of supply and demand, as long as the current situation remains intact, the oil and gas equipment and drilling and service providers are bound to continue their upward climb.

Today we're going to take a look at a few of them that have recently pulled back to support and are now resuming their prior uptrend.

Schlumberger (SLB)

Click here for larger image.

Source: TC2000

Schlumberger (SLB - commentary - Cramer's Take), the gorilla of the industry, recently pulled back to test the $95 support level and the long-term 200-day moving average. The pullback was on light volume, which you want to see in any positive retracement of a move.

You can also see at the bottom of the chart that during the correction, the institutional money stream barely budged. As long as the price continues to hold above the $90 level, I think we could see at least a test of the October high of $114.84 in the near future.

---

Suncor (SU)

Click here for larger image.

Source: TC2000

Suncor Energy (SU - commentary - Cramer's Take), which is heavily involved in the Canadian oil sands, also successfully pulled back to the $105 support level and is now in the beginning stages of a new leg up.

It is easy to see why this company has been a long-term favorite of oil baron T. Boone Pickens. For example, the company's recent financial results showed that its oil-sands-based operating cash flow skyrocketed more than 50%, and net income expanded 23% despite several billion dollars of expenditures on a new expansion. Suncor is targeting oil sands production of around 280,000 barrels per day. These types of positive developments should continue to benefit Suncor Energy over the long term.

---

Ensco (ESV)

Click here for larger image.

Source: TC2000

Ensco (ESV - commentary - Cramer's Take) announced Monday that one of its subsidiaries finalized a drilling contract with Cobalt International Energy for an ultra-deepwater semisubmersible rig. This deal is a two-year primary term they can be extended for three or four years.

That deal helped the stock recover quickly from the break last week below the 50-day moving average. This breach probably shook out a lot of the momentum players, and that will probably lead the way to new all-time highs in the near future.

---

Chesapeake (CHK)

Click here for larger image.

Source: TC2000

Major producers of natural gas have also been on a roll lately, as supply/demand remains tight in that area also. Since the breakout in February, Chesapeake Energy (CHK - commentary - Cramer's Take) has risen more than 46%. The company's chairman, Aubrey McClendon -- who has been buying millions of dollars of the stock in the open market -- suggests that natural gas is the answer and salvation for what ails the economy.

He believes that natural gas should be the prime source of fuel for vehicles. Whether that happens or not, it appears that the price is going to at least break into new all-time highs sometime this week.

---

At time of publication, Manning had no positions, although holdings can change at any time.

Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.