Oil Prices Overtake Equities; Libya Volatile

Oil prices surged again on Friday as conditions in the market reversed from a Thursday equities rally. Light sweet crude oil settled on Friday afternoon at $104.42, for a one-day gain of 2.5%, and the highest settle price since September 2008. Brent crude settled on Friday afternoon up more than 1%, at a price of $115.97.

On Thursday, light sweet crude had settled at $101.91 and Brent crude at $114.79, with Brent crude down by $1.72 from the previous day.
On Thursday, it was signs of stability in Libya that had led to oil trading profit-taking, while equities had their biggest one-day gain in three months, as a raft of economic data from the U.S. over the past week provided a more optimistic spin on the economy.
The Friday morning release of the government’s nonfarm payrolls reports didn’t disappoint — but even with the unemployment rate dropping to 8.9%, its lowest level since April 2009, meeting Street expectations wasn’t enough to send equities up for a second-straight day as crude oil prices ticked up again. Average hourly wages in the U.S. were flat in the jobs report, leading some market pundits to conclude that investors are fearing consumers won’t be able to keep up with rising oil prices.
Even amid the crude oil prices decline on Thursday, oil prices still remained within a two-and-half-year high range and well above moving averages. And amid the more positive economic data out of the U.S., there is still the tension between global economic growth and oil prices rising too high, and too fast for oil demand and global growth to stay on track.
Day-to-day headlines from Libya will continue to lead to volatile swings. The Thursday decline in oil had been predicated on headlines saying that Libyan leader Moammar Gadhafi had accepted a plan for a multinational coalition to intercede in the civil war in Libya. The plan was proposed by Venezuelan President Hugo Chavez. Yet on Friday violence in Libya and clashes in Tripoli between Gadhafi and rebel forces escalated, quickly changing the oil trading dynamic.
Energy stocks took part in the equities rally on Thursday even as crude oil prices fell, but on Friday, most of the major energy stocks were lower. The energy sector still turned in better performance than the broader equities indexes as crude oil prices surged. The energy sector was down marginally on Friday, while the Dow Jones Industrial Average and the S&P 500 Index declined by 0.7%. Equities staged a late rally on Friday with the Dow and S&P almost cutting in half their largest intraday losses by the closing bell.

The closing bell rally by the equity benchmarks allowed each to end the week with a minimal gain over the past five trading sessions.
The big energy sector winners on Friday were small-cap independent explorers, like Lucas Energy(LEI), which was up more than 33% on Friday, as well as U.S. land based drillers, which continued to trend up.