Please ensure Javascript is enabled for purposes of website accessibility

Why Centennial Resource Development Stock Jumped Nearly 8% Early Today

By Reuben Gregg Brewer - Updated Mar 24, 2021 at 11:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the energy company got a boost from the usual suspect, but there's an odd (even funny) "twist" here.

What happened

Shares of U.S. exploration and production company Centennial Resource Development (CDEV 2.82%) rose a quick 8% or so in early trading Wednesday. There was no news out of the company, but there was an interesting development in the Middle East. And it had a spillover effect.

So what

To get to the meat of the matter, this small and heavily leveraged energy company tends to be pretty volatile. Price moves in oil and natural gas often precipitate big moves in Centennial's stock. Oil and gas prices were on the rise today, and Centennial's stock followed along for the ride. But the reason for the oil and gas price moves is interesting.  

A container ship at sea.

Image source: Getty Images.

On Tuesday, a giant container ship managed to turn sideways in the Suez Canal, a vital shipping artery in the Middle East connecting the Mediterranean Sea and the Red Sea. To suggest it's a busy waterway would be an understatement.

So, with the ship basically wedged in the canal, no other ships can get through, including ones carrying Middle Eastern oil. According to some estimates, around 50 ships go through the canal every day, so each day it is closed, the line of waiting ships gets longer.

And at this point, there's no clear indication of when the ship will be dislodged and moved out of the way. Investors worried about the disruption this will cause in the energy sector bid up the price of energy commodities.  

Now what

Although one can imagine, perhaps with a smirk, the slow-moving event as a giant container ship got itself wedged in the Suez Canal, the global impact is far from trivial. That said, it is likely to be temporary. So investors probably shouldn't read too much into Centennial's bounce today. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Centennial Resource Development, Inc. Stock Quote
Centennial Resource Development, Inc.
$7.65 (2.82%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.