Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Hasn't Cold Weather Sent Energy Stocks Soaring?

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Today's winter storm has blanketed the Eastern Seaboard, hitting cities from Washington to Boston with snow and mixed precipitation after leaving the Southeast facing extremely unusual conditions. The impact on stocks has been minimal, as the Dow Jones Industrials (DJINDICES: ^DJI  ) were up about 17 points at 12:35 p.m. EST. But the bigger question many investors have is why ExxonMobil (NYSE: XOM  ) , Chevron (NYSE: CVX  ) , and other energy stocks haven't soared after such a harsh couple of winter months. Both Dow energy stocks are up today, but only in line with the minimal gains of the overall index.

One part of the explanation is that changing supply conditions in the industry have caused price movements in oil to disconnect from those of natural gas. For the most part, oil hasn't seen a very big move this winter, as even the relatively small percentage of Americans who heat their homes with heating oil has been falling in favor of natural gas. In fact, cold winter weather can sometimes even depress oil demand, as drivers stay off the road.

Yet that still doesn't answer the question of why sharply rising natural gas prices haven't boosted Exxon, Chevron, and other stocks. The problem is that the rise in natural gas has come from relatively depressed levels, and the vast majority of energy producers have moved away from natural gas production in favor of assets that will provide more lucrative oil and liquids. Exxon moved heavily into natural gas several years ago with its XTO Energy purchase, and Chevron followed suit with its more modest purchase of Atlas Energy. But in light of the longer-term declines we've seen in energy prices since the peak years of 2007 and 2008, producers are still unconvinced that moving back toward an emphasis on natural gas is warranted.

What will eventually help Exxon, Chevron, and the U.S. energy industry as a whole will be when it becomes possible to move all energy products, especially natural gas, more efficiently both within the U.S. and across borders through international trade. Investments in liquefied natural gas terminals and pipeline infrastructure are coming far slower than the new finds seen every day from exploration and production companies, and that has held back the ability of those producers to make the most from their discoveries. In the long run, though, equalizing worldwide prices should help many energy companies boost their profits, and even Exxon and Chevron could benefit to some extent from the ongoing advances in energy technology and transportation.

Find the stocks that will eventually soar from energy
It's not enough to bet on energy. You have to bet on the best plays in the industry. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 13, 2014, at 1:17 PM, buyandsqueeze wrote:

    I disagree...CVX isn't moving because Management has explained ad nauseum that production won't begin rising until later this year and then continue for several years...assuming a flat oil price, increased production is the only factor that can increase earnings, dividends and the stock there's no reason whatsoever to buy CVX at the for XOM, there's no production increase on the horizon...Kashagan is stalled, W. Siberia is way down the road, MAYBE there will be something eventually in Kurdistan, XOM's existing production will slowly sum, only a sudden increase in oil prices (e.g., from new Middle East instability) would move them in the near term

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2838411, ~/Articles/ArticleHandler.aspx, 8/27/2015 3:32:44 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated Moments ago Sponsored by:
DOW 16,382.01 96.50 0.59%
S&P 500 1,957.08 16.57 0.85%
NASD 4,734.81 37.27 0.79%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 3:17 PM
^DJI $16393.80 Up +108.29 +0.66%
CVX $75.79 Up +2.70 +3.70%
Chevron CAPS Rating: ****
XOM $73.18 Up +0.68 +0.94%
ExxonMobil Corp CAPS Rating: ****