Oil changes everything.

From an article on TheStreet.com: Oil jumped 4% on Thursday alone and ended the week at $47.16, up 5% from its Tuesday morning low. The International Energy Association (IEA) was the big mover on Thursday, revising its global forecast for 2005 to include higher demand and limits on supply growth.
China continues to surprise the IEA on the upside. The country used 16% more oil last year -- an increase four times greater than the overall rise in global demand -- and the IEA currently forecasts another 6% jump from China in 2005. Meanwhile, production in Russia could come under pressure, and OPEC is operating with little ability to increase production, the group said.

"The factors that contributed to the rise in oil prices throughout 2004 show little signs of abating in 2005," Merrill Lynch's energy team wrote in a report after the IEA forecast. OPEC's is running up against production constraints to add more supply, global demand will rise about 2.2% and the risk of "supply disruptions" remains high, the firm said. They're forecasting an average price per barrel of almost $46 on the Nymex futures exchange for 2005.

As a result, year to date, energy is up 7%, the top-performing of 10 broad sectors on a capitalization-weighted basis, according to Morningstar. Looking at more detailed performance of over 120 industries, oil and gas products is the leading group, up 14%, led by Valero Energy's (VLO:NYSE - news - research) 35% gain and Sunoco's (SUN:NYSE - news - research) 16% rise. Oil and gas services has gained 9%, with leaders including Pride International (PDE:NYSE - news - research), up 18%, and Rowan Companies (RDC:NYSE - news - research), up 17%. Also among the top 10 best-performing industries are oil and gas majors, up 7%, pipelines, up 5% and coal producers, also up 5%.


My obvious observation: Oil companies are going to be making a lot of money at $46 a barrel.