Energy Sector

The relative performance of energy stocks has been a substantial disappointment in the
current cycle, particularly so for 2010, when industry operating earnings were projected
as relatively strong on a comparative basis. Now, many non-energy producers have done
very well with earnings in 2010, and the oil price has not matched earlier expectations,
either. Importantly, nat. gas price realizations have been continually suppressed by ongoing
excess supply.

However, the relative performance of energy provider stocks has recently improved
sharply on a firming of oil prices and a possible extended basing interval for nat. gas.
The performance of the sector is noteworthy because a lengthy downtrend of relative
performance has recently ended following successful testing of a bottom. Consider:

Note as well that the energy providers often have stronger pricing power as an
economic recovery progresses.