What happened
Shares of oil and gas services company Core Laboratories (CLB) jumped as much as 7.1% in trading on Wednesday as oil prices soared. But the oil stock fell late in the day and closed up just 1.2%.
So what
Crude oil prices rose sharply early in trading on Wednesday with West Texas Intermediate (WTI) prices up as much as 6.2% to $61.34 per barrel. At 4 p.m. EDT, WTI is still up 5.2% for the day.
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While the price of oil doesn't directly impact Core Labs' business, it's a big driver of the amount of exploration companies will do, which ultimately funnels business to Core Labs. So, when prices rise the future prospects for the oil business improve as well. At least, that's what short-term price action in the stock can indicate.
Now what
The reality on the ground is that oil and gas exploration is going to be harder financially for companies in coming years. Oil and gas stocks are generally down over the last few years and investment is flooding into renewable energy instead of fossil fuels. Even if commodity prices rise short-term, that lack of funding is what's going to make it tough for explorers to grow long-term, which may be why shares pulled back to end the day.
