Oil company bankroller CIBC has said there are signs the bottom of the energy stocks market has been reached with the first signs that banks are again lending to each other again.

The interest rate at which banks lend to each other has stopped rising for the first time since spring, according to CIBC World Markets chief economist and strategist, Jeff Rubin. He said the bank was “cautiously optimistic” stocks would ride out the rest of the year without being hit by further banking system shocks.

But while new Chinese and U.S. stimulas plans are seen adding growth in at least China, he warned “the building blocks for a sustained equity rally are still not firmly in place.” While credit and liquidity fears had “abated somewhat”, prospects were still “clouded” for resource-heavy burses like Oslo’s or Toronto’s.

“On average, it has taken the Toronto Stock Exchange about three years to fully recover from a bear market,” Rubin said in his report this week. He offered the hope that the very speed of oil burses' collapse of recent months suggested hope for a speedier-than-normal recovery.

In-line with Wednesday’s International Energy Agency Report which said renewable energy would surpass gas in electricty supplied, Rubin said he suggested “cutting” one’s exposure to gas stocks, “specifically natural gas stocks”, which face “burgeoning non-conventional supply that could drive prices to an average of $7.50 per million British thermal units by 2009.

Despite the cut to natural gas stocks, the CIBC World Markets is staying “overweight” in the energy sector.

“Oil is still the best play on recovery, when temporary market fears of demand destruction should quickly morph into more lasting fears of supply destruction,” Mr. Rubin, who was perhaps the first to predict $100 oil was quoted as saying.

“With the marginal cost of new oil sands projects over $90 per barrel, the recent plunge in oil prices has already trimmed $30 billion from Canadian project investment — ditto for the investments in the Brazilian offshore, (Gulf of Mexico) deepwater, and many other sources of tomorrow's expected supply,” he warned in the CIBC World Markets Report.

“Investors are likely to find that oil demand can be turned back on a lot easier than bringing back supply," says Mr. Rubin.

Canada’s banking system, with CIBC as a driver, has been ranked the soundest in the world in a World Economic Forum report on stability in banking in the wake of the credit crisis. Norway’s was ranked about 19th, after Spain’s, while the U.S. and Britain’s slipped to 40th and 44th behind El Salvador and Peru.

Tags: CIBC