Why Are Energy Stocks Up Today?

  • Oil prices are up nearly 3% today on the news that Russia is mobilizing more troops for its war in Ukraine.
  • Consequently, energy stocks are also up more than 1% in premarket trading today.
  • Additionally, Germany announced that it is nationalizing natural gas giant Uniper (UNPRF) as it prepares for the colder winter weather.
Energy Stocks - Why Are Energy Stocks Up Today?

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Energy stocks are marching higher today after Russian President Vladimir Putin announced that he is mobilizing 300,000 more military personnel in an escalation of the war in Ukraine.

Putin’s military escalation is seen as exacerbating the current energy crisis around the world, sending prices for crude oil and natural gas up today, which is buoying the share prices of energy companies. The stocks of ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), and Shell (NYSE:SHEL) are each up more than 1% this morning.

What Happened

Prices for crude oil jumped nearly 3% on news that Russia is increasing its military build-up in Ukraine. Brent crude oil, the international standard, increased $2.26 to $92.88 per barrel, while West Texas Intermediate (WTI) crude oil, the American benchmark, gained $2.15 to $86.09 a barrel on the news of Russia’s partial mobilization.

The rise in oil prices is sending energy stocks higher. However, the escalation of Russia’s war in Ukraine is not the only news that is lifting energy prices.

The German government announced that it is nationalizing utility company Uniper (OTCMKTS:UNPRF) in the wake of Russia halting natural gas flows to Europe.

Russian state-owned energy giant Gazprom has indefinitely suspended natural gas flows to Europe via the Nord Stream 1 pipeline that runs to Germany.

Uniper is Germany’s largest importer of natural gas and has been hurt by the reduced gas flows from Russia, which has sent prices soaring throughout Europe in recent months.

Why It Matters

Oil prices hit multi-year highs in March of this year after Russian forces first invaded Ukraine. Now, the prospect of an escalating war in Ukraine is raising the likelihood that global energy supplies could be further disrupted in the coming months.

At the same time, Germany, France, and other nations across Europe are scrambling to fill their natural gas reserves before the winter and fear that Russia, which supplies 40% of Europe’s energy needs, will continue to weaponize oil and natural gas as the colder weather arrives.

The Organization of the Petroleum Exporting Countries (OPEC) is currently falling a record 3.58 million barrels of oil per day short of its production targets, or about 3.5% of global demand. Analysts say the shortfall highlights the tightness of oil supplies around the world, a situation that could worsen in coming weeks and months.

While higher prices for oil and natural gas are bad news for consumers and businesses trying to heat their homes and factories, they are good news for energy companies, many of which have reported record profits this year.

What’s Next for Energy Stocks?

There appears to be no end in sight to the war in Ukraine, and the situation appears to be deteriorating with Russia announcing a massive troop build-up. This is likely to put additional strain on supplies of oil and natural gas through the end of this year.

However, this is a situation where the bad news is actually positive for energy companies and their shareholders. Energy stocks continue to outperform the broader market that has fallen into bear territory.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


Article printed from InvestorPlace Media, https://investorplace.com/2022/09/why-are-energy-stocks-up-today-3/.

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