Oil Outlook: Iran Threatens to Close Strait of Hormuz
Adding to the tensions between the U.S. and the Middle East, Iran's navy chief stated that his country held no reservations about closing the Strait of Hormuz at the mouth of the Persian Gulf, the passageway through which a sixth of the world's oil flows.
The warning was the second in two days, reports The Associated Press. The threat comes in response to concerns the West will impose sanctions on Iran's oil shipments and Tehran's oil industry. It is also heightened by military threats from the U.S. and Israel to stop Iran's nuclear program.
If the strait were to close, it would cut off significant oil supplies and force shippers to take longer routes, causing prices to rise. "It also potentially opens the door for a military confrontation that would further rattle global oil markets," adds The Associated Press.
Due to the strategic importance of the Strait and the ease with which Iran could cut it off, nations and markets have been quick to react.
"The U.S. Congress has passed a bill banning dealings with the Iran Central Bank, and President Barack Obama has said he will sign it despite his misgivings. Critics warn it could impose hardships on U.S. allies and drive up oil prices."
Meanwhile, Saudi Arabia said it will offset any oil loss from an Iranian blockade, causing crude oil prices to drop $1.15 to $100.19 a barrel. Brent crude fell 90 cents to $108.37 a barrel in London.
The future of oil prices has become very complicated. The geopolitical risks clearly present some upside potential to oil prices. But the industry faces the potential downside of a slowing economy, spurred by persistent worries about Europe and China, that reduces demand and prices for oil.
Do you think Iranian officials are presenting a real enough threat to offset a slowing global economy?
So we were wondering, which oil companies have been boosted by bullish sentiment?
To create this list, we started with a universe of about 200 oil companies. To refine the list, we collected data on institutional transactions, and identified the names that have seen significant inflows during the current quarter.
And to further refine the list, we collected data on short-seller trends, and identified the names that have seen a significant decrease in shares shorted during the current month (i.e., short-sellers think the upside of these stocks outweighs the downside).
Sophisticated investors, like hedge fund managers and short-sellers, think these oil companies are going higher -- do you agree?
1. Gulfport Energy (NAS: GPOR) : Develops and produces oil and gas in the Louisiana Gulf Coast. Net institutional purchases in the current quarter at 7.4M shares, which represents about 17.09% of the company's float of 43.29M shares. Shares shorted have decreased from 4.23M to 3.67M over the last month, a decrease which represents about 1.29% of the company's float of 43.29M shares.
2. Hornbeck Offshore Services (NYS: HOS) : Operates offshore supply vessels (OSVs), multipurpose support vessels, and a shore-base to provide logistics support and specialty services to the offshore oil and gas exploration and production industry primarily in the United States and Gulf of Mexico. Net institutional purchases in the current quarter at 1.6M shares, which represents about 6.55% of the company's float of 24.43M shares. Shares shorted have decreased from 6.54M to 6.14M over the last month, a decrease which represents about 1.64% of the company's float of 24.43M shares.
3. Approach Resources (NAS: AREX) : Engages in the acquisition, exploration, development, and production of oil and gas properties in the United States. Net institutional purchases in the current quarter at 3.3M shares, which represents about 13.24% of the company's float of 24.92M shares. Shares shorted have decreased from 6.39M to 5.59M over the last month, a decrease which represents about 3.21% of the company's float of 24.92M shares.
4. GeoResources (NAS: GEOI) : Engages in the acquisition, reengineering, development, and exploration of oil and gas reserves in the Southwest, Gulf Coast, and the Williston Basin areas of the United States. Net institutional purchases in the current quarter at 900.9K shares, which represents about 4.54% of the company's float of 19.83M shares. Shares shorted have decreased from 3.64M to 3.36M over the last month, a decrease which represents about 1.41% of the company's float of 19.83M shares.
5. Rex Energy (NAS: REXX) : Operates as an independent oil and gas company in the Appalachian, Illinois, and Denver-Julesburg basins. Net institutional purchases in the current quarter at 3.7M shares, which represents about 10.41% of the company's float of 35.54M shares. Shares shorted have decreased from 10.74M to 10.31M over the last month, a decrease which represents about 1.21% of the company's float of 35.54M shares.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. List compiled by Eben Esterhuizen, CFA.
Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Short data sourced from Yahoo! Finance. Institutional data sourced from Fidelity.
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