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Why Centennial Resource Development Stock Jumped Nearly 8% Early Today

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

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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. 

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Stocks Mentioned

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

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