Last week was unpleasant for some operators in the energy sector, particularly ExxonMobil (NYSE:XOM). Reports of higher crude and gasoline inventories were perhaps the largest factor weighing on Exxon shares, which finished 4% lower for the week. That may not sound like a lot, but $20 billion of market cap suddenly went poof.

There were several bright spots, however. PetroChina (NYSE:PTR) shares leapt on news of its People's IPO. Transocean (NYSE:RIG) booked a biggie. As for Oceaneering International and Western Refining, well ... I have no idea why they had such a strong week.

Wall Street analysts issued their usual tweaks to their ratings of various firms in the sector. Many of these adjustments can be safely ignored, but I like to keep tabs on the opinions of some of the Street's savviest. That's where Motley Fool CAPS comes in handy -- we track all the analysts' picks and pans to see who's earning their keep.

Deep water, deep profits
No fewer than four analysts scrambled to raise their estimates for Transocean, which seems about as unsinkable as its giant mobile offshore drilling units. The analysts' bullishness is not entirely misplaced, but they don't seem to be adding a lot of value by merely reacting to events that have already transpired. Where were these guys last month, when management signaled its bright outlook pretty loud and clear?

Only one of the four target price boosts came before Transocean's announcement of its new BP contract. Who was this prescient prognosticator? None other than Capital One Southcoast, dubbed one of Wall Street's best in our CAPS tracking system. Capital One sports an extremely high accuracy rating, thanks to its many smart picks in the energy space:

Company

CAPS Says (Out of 5):

Firm's Pick Leading S&P By:

Arena Resources

*****

42.5%

GlobalSantaFe (NYSE:GSF)

*****

23.7%

National Oilwell Varco (NYSE:NOV)

*****

35.4%

I have to admit, I found some of the reasons that Capital One cited for boosting its rating on the deepwater driller a bit shallow. Russell rebalancing? Increasing investor enthusiasm? What's wrong with just generating buckets of cash? These folks seem to lean a bit heavily on momentum factors -- they boosted their 2008 earnings-per-share estimate by only 2.8%, versus a price target boost of 12.3%. That suggests to me that they are comfortable with having the shares run ahead of fundamentals. This is exactly the time I'd be looking for my research outfit to tell me to think about holding steady or taking some profits, not increasing my position further.

The long-distance runner
 Marathon Oil (NYSE:MRO) has been in the oil business longer than the stuff's been used to make gasoline. Originally operating as The Ohio Oil Company, Marathon was the largest-producing unit of Standard Oil before that company's bust-up at the hands of Teddy Roosevelt. Today, the company has both a diverse upstream portfolio and a major footprint in U.S. refining, particularly in the Midwest.

For anyone not following along at home, the refining subsector has experienced a lot of outages and production problems this year. In other words, it's been a very good year. The very tightness in refining capacity has driven the crack spread -- the profit that refiners earn off a barrel of crude oil -- into the stratosphere. At this point, then, the outlines of the debate are pretty simple: Skeptics point to unsustainably high record profits and past boom-bust cycles, while boosters point to the barriers to entry blocking the profit-margin erosions typical of competitive industry.

Bear Stearns has had a rough time so far with its two-month-old underperform call on Marathon. In just a short time, the stock has jumped from $50 to $62, and the stock still sports a P/E ratio of only 6 and change. That's a lower P/E than that assigned to refining pure plays such as Valero (NYSE:VLO) and Western Refining. This is a bit surprising, given the greater stability in Marathon's more balanced portfolio.

While I find Bear's call a bit premature, I can't disagree with AG Edwards' downgrade to "hold" last week. I'd be pretty hypocritical not to -- it's the same call I made in CAPS earlier this month. When I picked Marathon to outperform the market for a few months, I had no idea it would do a one-month 25% sprint. So AG Edwards and I are playing it safe. We both recognize that the crack-spread tango can continue for some time, but the same level of skepticism just isn't there anymore.

Well, that's all for this week. I look forward to keeping you up to date on future tweaks -- the ones that matter, that is.

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Fool contributor Toby Shute doesn't own shares in any company mentioned. We've got an overweight rating on The Motley Fool's disclosure policy.