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danielosborne
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I am an investment professional currently working for the amazing Wall Street Bad Boys.
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  • Commodity Review: A Closer Look At Oil Stocks To Watch With The Coming Of Hurricane Season 0 comments
    May 28, 2012 10:25 AM | about stocks: BP, CVX, COP, XOM, RDS.A, DO, HERO, ENB, SUN, VLOWY

    Today is Memorial Day, meaning US markets will be closed but in non-US markets, crude oil futures were rising thanks to a weaker dollar, an unclear outlook over talks involving Iran and the UN Security Council, continued economic uncertainty and perhaps most importantly of all, the approach of hurricane season.

    Specifically, hurricane season in the Atlantic Ocean, the Gulf of Mexico and the Caribbean runs roughly from June 1 to November 30 but it's important to remember that hurricanes can happen outside of this time period as well. In fact, tropical storm Beryl, the second storm or hurricane of the season, is now approaching the Southeast coast of the United States and its not even June yet.

    So just how do or can hurricanes impact oil prices? For starters, it's worth remembering that over the past several years, major hurricanes like Katrina, Gustav and Ike have temporarily wiped out substantial offshore natural gas and crude oil production in the Gulf of Mexico. In fact, Hurricane Gustav, a Category 4 storm that struck in 2008, temporarily shut down 100% of Gulf crude oil and 95% of natural gas production.

    With that in mind, here is a quick run down of oil stocks that are vulnerable to the impact of hurricanes:

    • BP plc (NYSE:BP), Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM) and Royal Dutch Shell plc (NYSE:RDS.A) all have production (as in offshore oil rigs) and refining assets that are vulnerable to hurricanes. Each of these oil stocks could loose billions of dollars due to lost production resulting from a major hurricane.
    • Diamond Offshore Drilling (NYSE:DO) and Hercules Offshore (NASDAQ:HERO) provide drilling or marine services to oil companies involved in offshore drilling in hurricane prone regions like the Gulf of Mexico. In addition, offshore drilling and marine services stocks would be impacted by lower utilization rates during and immediately after a major hurricane.
    • Enbridge (NYSE:ENB) has a natural gas and oil pipeline network that could be vulnerable to hurricanes.
    • Sunoco (NYSE:SUN) and Valero Energy Corporation (NYSE:VLO) are in the refining business - meaning a severe hurricane can result in damage to their refineries or a short-term reduction in refining capacity.

    On the other hand, stocks like Seacor Holdings (NYSE:CKH) and GulfMark Offshore (NYSE:GLF) that provide marine support vessels and related transportation equipment should benefit after a major hurricane as they will help those impacted to rebuild.

    So what's a good trading strategy for oil stocks during this hurricane season? For starters, don't loose site of the BIG picture as in the US economy, the European debt crisis, uncertainty about the Chinese economy, Middle East unrest and problems with Iran as any event in these areas can have a significant impact on oil prices. Otherwise and if you trade any of the previously mentioned oil stocks, keep an eye on weather forecasts or any news about hurricanes or tropical storms forming over the next several months.

    Finally, add a few of the oil stocks that could be impacted to your NextCandle.com My Portfolio screen to keep an eye on our latest stock forecasts or probabilities for them. And while we cannot promise that NextCandle.com will be able to predict the next big hurricane, we do have a pretty good track record of predicting a stock's next trading moves!

    NOTE: THIS PIECE WAS JUST POSTED ON THE NEXTCANDLE.COM BLOG.

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