Oil settles at $107.63 and energy stocks fall anyway — on fourteen big oil days since May the sector rose every time; Thursday it didn’t, and here is what that says

Brent crude settled at $107.63 on Thursday, up 5.9%, its second close above $100 in two days and its highest since the spring; West Texas Intermediate rose 6.7% to $102.48. The US oil fund gained 5.6%. And the energy sector — the eleven per cent of the S&P 500 whose business is selling that barrel — fell 0.6%, exactly as much as the index. On the fourteen sessions since May in which the oil fund rose more than 3% in a day, the energy ETF had risen every single time, by 1.9% on average, capturing about two-fifths of the oil move. Thursday was the first time it fell.

The gap did not start on Thursday. Over the past five sessions the oil fund is up 11.5% and the energy sector 0.5%. Since 1 July, when the current leg of the oil move began, the fund is up 53% and the sector 23%, so the sector has followed the barrel at roughly half speed all summer — until this week, when it stopped following at all. This is a Pulse about what a market is saying when it will not buy the companies that benefit from the price it is most afraid of.

Fourteen big oil days, one exception

We pulled every session since 1 May in which the US oil fund closed up more than 3%. There are fifteen. On the first fourteen — from 4 May through 1 September — the Energy Select Sector fund closed higher each time, with gains from 0.3% (23 July, oil +5.9%) to 4.7% (10 August, oil +6.7%). The average oil move on those days was 4.9%; the average energy move 1.9%. That ratio, about 0.39, is what energy stocks normally deliver on an oil spike: less than the commodity, because the companies hedge, because refiners and service names have costs that rise with the barrel, and because the market discounts a spike it expects to fade.

On 10 September the oil fund rose 5.6% and the energy fund fell 0.6%. One day is one data point, and we will not build a thesis on it. But it lands on a week in which the ratio had already collapsed — 0.5% of sector gain against 11.5% of oil gain since last Thursday, a capture of about one-twentieth — and on the day the barrel reached its highest price of the year. The exception arrived at the extreme, which is usually where exceptions mean something.