Instability in Iraq has sent crude prices to yearly highs, boosting oil-producing stocks. Will it last?
This gain is mainly due to the increase in profit seen by these companies thanks to rising crude prices.
When conflicts in oil-rich countries break out, the overall supply they can produce diminishes, and—with demand for the good remaining constant—prices jump. The listed companies, however, do not operate largely in the Middle East, so they are able to pull out the same amount of oil for the same costs and sell it at a higher price, significantly boosting their profits.
Oil refiners, on the other hand, see margins get squeezed as prices increase, hurting their bottom line. That is why stocks including Valero (VLO), Phillips 66 (PSX), and Marathon Petroleum (MPC) have all dropped in value since the rise in violence.
However, there is a top to the profits of drillers, because as prices reach the $110 per barrel threshold, as they did in 2008, 2011, 2012, and 2013, people everywhere will cut back on usage, and demand will fall, dragging prices down.
Could there be a steady plateau in prices as we have seen since 2011, or will drillers watch their profits tank as prices fall like in 2008?
Click on the interactive chart to view data over time.
1. Anadarko Petroleum Corporation (APC, Earnings, Analysts, Financials): Engages in the exploration and production of oil and gas properties primarily in the United States, the deepwater of the Gulf of Mexico, and Algeria. Market cap at $55.04B, most recent closing price at $107.41.
2. Chevron Corporation (CVX, Earnings, Analysts, Financials): Engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. Market cap at $245.42B, most recent closing price at $128.83.
3. Marathon Petroleum Corporation (MPC, Earnings, Analysts, Financials): Engages in refining, transporting, and marketing petroleum products primarily in the United States and internationally. Market cap at $24.92B, most recent closing price at $86.58.
6. Exxon Mobil Corporation (XOM, Earnings, Analysts, Financials): Engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. Market cap at $439.87B, most recent closing price at $102.42.
(List complied by Robbie Citrino. Monthly return data sourced from Zacks Investment Research. All other data sourced from finviz.)
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- Anadarko Petroleum Corporation(APC, Chart, Download SEC Filings)
- Chevron Corporation(CVX, Chart, Download SEC Filings)
- Marathon Petroleum Corporation(MPC, Chart, Download SEC Filings)
- Phillips 66(PSX, Chart, Download SEC Filings)
- Valero Energy Corporation(VLO, Chart, Download SEC Filings)
- Exxon Mobil Corporation(XOM, Chart, Download SEC Filings)
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