Oil prices have outpaced equities since the March 2009 stock market low, and while oil and stocks have tracked each other more closely this year, energy is still leading the way.
While the S&P 500 has risen 68 percent since the March bottom, oil futures are up nearly 75 percent. Oil , near a 2010 high, is up 3 percent on the year versus a 2 percent gain for the S&P 500.
Trading volumes are an even more telling sign that investors want to be in oil and commodities—in a big way. Trading volumes on the New York Stock Exchange have been anemic this year, with February volumes down 8 percent from January.
But energy trading at the Chicago Mercantile Exchange was up 5 percent last month compared with January of 2009. Metals and other commodities were up 57 percent and 16 percent, respectively, and overall electronic volume was at a new record. Trading on the Intercontinental Exchange (ICE) electronic platform is growing even faster, with overall energy volume up more than 50 percent.
If this trend continues, some market watchers say the surge in Brent crude volume on ICE may cause them to focus on this contract rather than the Nymex's benchmark WTI crude as the main market-maker for oil prices.
Regardless of where oil is changing hands or what its benchmark is, most analysts say oil prices are poised to rise. Demand from China and emerging markets, geopolitical issues, and enormous money flows have boosted the long-term outlook for crude over the next two to five years well beyond the fundamentals of supply and demand.
With the "risk trade" back on during the past week, investors looking to hedge their bets against political and regulatory uncertainty facing the U.S. stock market will likely continue to pour money into oil and commodities.
Look for Sharon's reports from the CERA Energy Conference in Houston this week.