Stocks & Option – What To Do during Uncertainties?

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Mar 28 2007
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Oil prices rose by more than $1 a barrel Wednesday but were still below an earlier spike of more than $5 on rumors – denied by the U.S. military – that Iran had fired a missile at a U.S. ship in the Persian Gulf.

Rumors about a military confrontation spurred panic buying in after-hours trading Tuesday, sending oil prices above $68 in a matter of minutes. Rising tensions between Iran, a major oil producer, and the West have created a potentially dangerous situation in the Gulf and markets are jumpy.

Prices fell back within a couple hours, although they remained higher than Tuesday’s settlement price of $62.93 a barrel. Another possible calming factor was word from Iran’s foreign minister that a detained female British sailor would be freed on Wednesday or Thursday. Light, sweet crude for May delivery on the New York Mercantile Exchange rose $1.13 to $64.06 a barrel in electronic trading by afternoon in Europe.
“The major concern is that if the rumor had been true, you’d have a major disruption to supply,” said Andrew Harrington, an analyst with ANZ Global Natural Resources in Sydney. “You have about a quarter of the world oil coming through the Straits of Hormuz and any military conflict would severely disrupt those supplies, which obviously sees the price spike … The political premium had been taken out of the price, and as soon as any signs of new development takes place, they get put back into the price.”
Traders were also awaiting U.S. government oil inventories data due later in the day. The U.S. Energy Department’s report is expected to show a gain of 1.1 million barrels in crude oil inventories in week ending March 23, according to analysts polled by Dow Jones Newswires. Gasoline supplies are expected to decline by an average of 1.8 million barrels, while distillate stocks — which include heating oil and diesel fuel — are expected to dip by 800,000 barrels.
Vienna’s PVM Oil Associates noted OPEC forecasts that global crude stocks could grow by around 700,000 barrels a day in the second quarter of this year and said “this would be a far more bullish development” than in 2006 and 2005, when stocks increased by far greater amounts.
Still, concerns about the Middle East were likely to remain the main driver of prices. Tehran continues to hold 15 British sailors it captured on Friday, giving no indications of their whereabouts despite repeated pleas for their release from Britain, the United States and the European Union.
Also, the U.S. kicked off a military training operation in the Persian Gulf on Tuesday that commanders said was meant to send a warning to Iran. The operations are the largest show of U.S. force in the Gulf since the 2003 invasion of Iraq.
This is an almost once in a lifetime to make money either investing stocks or trading option in one particular sector – energy or oil stocks. Past events has shown that in times of uncertainty such as now is an excellent time to “long the oil stocks.” Again some of my favorites include the following:
  • EOG Resources, Inc. (NYSE: EOG, stock) – explores, develops, produces and markets natural gas and crude oil primarily in major producing basins in the United States of America (United States), Canada, offshore Trinidad, the United Kingdom North Sea and other international areas.
  • Transocean Inc. (NYSE: RIG, stock) – primary business is to contract these drilling rigs, related equipment and work crews primarily on a day-rate basis to drill oil and gas wells – specializes in sectors of the offshore drilling business with a focus on deepwater and harsh environment drilling services.
  • Schlumberger (NYSE: SLB, stock) – an oilfield services company, supplying technology, project management and information solutions.
  • GlobalSantaFe Corporation (NYSE: GSF, stock) – an offshore oil and gas drilling contractor, owning or operating a fleet of 61 marine drilling rigs, charges on a daily rate basis.
  • EnCana Corporation (NYSE: ECA, stock) – is a holder of natural gas and oil resource lands onshore North America.
  • Halliburton Company (NYSE: HAL, stock) – an oilfield services company and a provider variety of services, products, maintenance, engineering and construction to energy, industrial and governmental customers.
  • Valero Energy Corporation (NYSE : VLO, quote) – owns and operates 18 refineries located in the United States, Canada and Aruba that produce refined products, such as reformulated gasoline (RFG), gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur diesel fuel and oxygenates (liquid hydrocarbon compounds containing oxygen).

# TIP: If today’s (another 30 minutes) oil investories shows sign of drop of supplies, oil-stocks will rally and spike. Remember to buy at least 6 months into the expiry of oil-stocks as you need all the time-value on your side.

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