Energy Stocks That Soared Today

The energy sector has been the bottom-feeder of the market over the past year, losing 17.5%. The huge discount can be attributed to record-low natural gas prices as well as shrinking demand for coal. While the consensus is that natural gas prices will trend higher over the long term because of increased demand, coal is not as certain. In fact, the percentage of electricity generated from coal is expected to fall back to levels not seen since the 1940s. And with oil prices decreasing over the past few months because of eurozone uncertainties and slowing growth in China, the sector could continue its slide in the near term.

Today's action
July futures for WTI crude were crushed yesterday by the weight of the European financial muddle, dropping 2.62%. Today, however, the futures rose on expectations that the Federal Reserve will eventually roll out QE3 this year.

Index

Price

Gain/ Loss %

NYMEX Oil 83.44 0.91%
Crude Oil Volatility Index 39.45 (6.76%)
Henry Hub Natural Gas 2.24 0.77%

Source: CME Group.

All applying a slight upward pressure on crude prices is OPEC's expected strategy of tightening oil production in an attempt to increase oil prices. With the cartel meeting on Thursday, markets might have to react to slowing production threats soon.

Today's top performers
After losing 65% of its value so far this year, First Solar (Nasdaq: FSLR  ) jumped more than 20% on unexpected European demand for its solar modules. The demand is causing the company to keep its Frankfurt, Germany, plant open, but the rally could be short-lived, as the industry as a whole remains extremely depressed.

In the oil and gas exploration sphere, the small player Halcon Resources (NYSE: HK  ) continued its surge today. It moved up 2.73%, closing in on making a 20% increase so far this month. The company recently bought oil and gas assets in East Texas that spread across 16,000 acres, with expectations of increasing oil production by 2,000 barrels per day.

The midstream sector posted substantial gains today, with investors moving into less volatile transportation and refining securities. Now with United States refiners increasing capacity after scheduled maintenance sessions, companies such as Valero (NYSE: VLO  ) , up 2%, and Marathon Petroleum (NYSE: MPC  ) , up 3.14%, are ready to take advantage of discounted crude prices.

Tesoro (NYSE: TSO  ) finished the day up more 4% as it opened its California 97,000-barrel-per-day refinery in California. This opening is good news for Tesoro as well as consumers in San Francisco and Los Angeles, as the increased production should put slight downward pressure on gasoline prices.

Takeaway
With increasing natural gas production and limited LNG export facilities, gas prices are expected to remain depressed until more infrastructure is built out. However, crude prices will remain volatile until eurozone economic troubles are alleviated. With increased instability expected in the market, now is a great time to check out The Motley Fool's special report describing 3 Stocks That Will Help You Retire Rich. This free report will list three remarkable companies as well as offer great advice on how to invest to secure a comfortable retirement -- get your free report now.

Joel South owns shares of no company listed above. Motley Fool newsletter services have recommended buying shares of First Solar. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On June 13, 2012, at 12:22 AM, PRODOD wrote:

    It seems that the 'spark' that ignited today's FSLR rally may have been caused by a misunderstanding of FSLR's true inventory position. With a $300 million inventory build in Q1 & Q2 it would seem that FSLR had plenty of PV panels to meet "unexpected" German demand. So what is the value of continuing German production rather than using that unexpected demand to reduce the inventory build? I've got a call in to FSLR investor relations asking for information on this question.

  • Report this Comment On June 13, 2012, at 12:12 PM, Paulson545 wrote:

    Two Billionaire investors George Soro's and T Boone Pickens have been buying shares of Valero. They must think the refinery is undervalued....JMHO

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