Seadrill Ltd (NYSE: SDRL) is having yet another overwhelmingly strong start to the trading session this morning, and for a very good reason. At the end of the day, the price of oil is climbing, and since the company operates in that industry, its opportunity to build revenue and earnings is growing as well. Today, we’ll talk about:
- Why SDRL is headed for the top;
- what we’re seeing from the stock; and
- what we’ll be watching for moving forward.
SDRL Heads For The Top
As mentioned above, Seadrill is having an overwhelmingly strong start to the trading session this morning as oil prices head for the top. Ultimately, the company makes its money through oil. Therefore, as oil prices climb, the company’s margins tend to do the same; with oil marching higher, investors are getting excited about SDRL. So, why is oil climbing? Well, it’s a mix of two factors:
- OPEC Policy – OPEC is the world’s largest oil cartel, accounting for a massive majority of the world’s oil supply. When the oil glut reared its head, it took a while, but OPEC changed its policy to reduce the amount of oil produced as well as reduce the amount of oil that can be sold to certain regions. While this didn’t have an immediate effect, we are seeing the effect now as the supply glut starts to disappear.
- Iran – While the OPEC policy is a key driver in the movement in the price of oil that we’re seeing, the catalyst that started to send the value of the commodity soaring had more to do with Iran, OPEC’s third-largest member. Due to tensions between the United States and Iran, sanctions have been placed on the country, cutting its oil supply out of the global equation. With already low supplies from the rest of OPEC, and none coming from Iran, supply is shrinking quickly, leading to gains in the value of oil and, ultimately, stocks like SDRL.
What We’re Seeing From The Stock
As investors, one of the first lessons that we learn is that the news moves the market. In the case of Seadrill, the news proved to be overwhelmingly positive. While the company itself hasn’t released anything new, the fact that oil is climbing in value is leading to excitement surrounding the stock, as growth is likely coming. So, it’s no surprise that we’re seeing gains today. Of course, our partners at Trade Ideas were the first to alert us to the movement. At the moment (10:02), SDRL is trading at $0.67 per share after a gain of $0.048 per share (7.76%) thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on SDRL. In particular, we’re interested in following the story surrounding the price of oil and how the growth in the value of the commodity leads to continued growth in the stock. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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