Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of offshore oil and gas companies exploded higher today as the price of oil jumped again.
So what: Oil and gas developers Cobalt International Energy
Lower production from OPEC, a falling dollar, and a little more certainty in Europe's debt situation are helping drive the price of oil higher today. I argued that the low price of oil couldn't last long a few weeks ago, and now that it looks like the world isn't going to end, energy traders are back to being bullish on oil.
Now what: Offshore companies are especially sensitive to the price of oil because they operate with a relatively fixed cost base to produce oil. When oil moves up or down, their earnings will be leveraged by that move, so today's move is obviously a breath of fresh air. The pace of oil's rise might slow, but I think the general trend will continue as Europe figures out its problems and emerging markets continue to demand more oil.
I'm bullish on these offshore oil companies in the long run, but it may be a bumpy ride if the current momentum doesn't continue in a straight-line path upward.
Interested in more info on offshore oil explorers? Add them to your watchlist.