May 22 2007
Time to make money investing energy stocks – oil prices were little changed Tuesday after jumping above $66 a barrel in the previous session on worries about gasoline supply. Light, sweet crude for June delivery was flat at $66.27 a barrel. Worries that violence could rise in Nigeria ahead of the inauguration of a new president supported prices. Nigeria is one of the world’s largest crude producers, and attacks on oil installations have become an almost daily occurrence following elections there last month. In fact I’ve almost forgotten about energy stocks as I was busy with other topics.
Traders are also worried about gasoline supplies heading into the peak Northern Hemisphere summer driving season which kicks off this weekend in the U.S. The U.S. Energy Information Administration reported last week that domestic gasoline inventories – while increasing to 195.2 million barrels for the week ended May 12 – are still well below the average for this time of year.
One of the most important factors affecting the price of oil is weather. When Hurricane Katrina hit the Gulf of Mexico Coast back in 2005, the price hit the record of $70 per barrel before surged to $78 level in July 2006 on worries of another bad storm season. Of course it didn’t materialize and the price tumbled to $60 per barrel thereafter. How can you make money out of current volatility in enery price? You’re playing against the human’s emotion, not that I like to have another hurricane to strike and damage those poor people’s property and lives. As long as the uncertainty of another thunderstorm and hurricane is on the air, people’s perception would be the fuel price will surge. Professional investors will just hedge whatever price the market has to offer out of fear that another Katrina will hit again.
The U.S. weather forecast is reporting that dangerous thunderstorms are possible Wednesday afternoon and evening across parts of Minnesota, Wisconsin and Iowa as a potent storm system drifts through the northern Plains. Deep moisture surging up from the Gulf of Mexico will fuel the thunderstorms, while a strong jet stream moving overhead will energize the thunderstorms, leading to damaging wind gusts and hail. Though it’s still too early to tell if the weather will cause serious consequences to the oil fields especially in Texas or the Gulf of Mexico, the time is excellent to long on energy stocks. With the combination factors of Nigeria’s violence, the summer driving season and the possible of hurricanes, the energy stocks will only have one way to go – UP.
So which energy stocks to place your bet? Here’re some of my favorites:
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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.
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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), g
asoline 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: Wednesday will be the announcement date for the U.S. oil investories data. The data could either help the oil stocks to spike or the other way round.
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May 22nd, 2007 by financetwitter
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