10 Stocks Rallying as Oil Prices Surge
BOSTON ( TheStreet) -- Rising oil prices are back on the front burner as one of the world's chief economic concerns, this time due to Iran's threat to cut off many of its biggest European customers, and that spells opportunity for some oil industry players.
Iran's saber-rattling has been going on for weeks, but over the weekend, the country's oil-ministry news Web site said the nation will cut supplies to the U.K. and France.
The European Union has been one of Iran's biggest markets, taking about 18% of its total exports last year.
Iran's threat comes in response to an embargo of Iranian oil that the 27-nation European Union agreed to last month, to begin in July due to Iran's efforts to build nuclear weapons.
Reuters reported Thursday that Iran's top oil buyers in Europe are already making substantial cuts in supply months in advance of the EU sanctions, and are planning to reduce inflows to the continent in March by more than a third.
And with Libya and Iraqi supplies still mostly off-line, the loss of Iran's supply will push oil prices ever higher worldwide.
Investors have been pouring money into crude oil futures in anticipation of that.
For U.S. consumers, that means $4 a gallon gas within the next few weeks for some parts of the country, according to AAA, and higher later in the summer, up from the current $3.52 national average, a price not seen since 2008. It is hoped that relatively low domestic demand should keep it from reaching $5 a gallon.
Iran forecast in December that if it cut off oil to the EU, prices would double worldwide, but that is seen as puffery as weak worldwide demand and promises from Saudi Arabia that it will make up the difference have helped mitigate price increases so far.
But analysts estimate that Iran's noise-making has already added $5 to as much as $15 to a barrel of crude oil this year in Europe.
Benchmark crude oil futures prices for March delivery rose to a nine-month high for the U.S. market Friday and a year-to-date gain of about 3.7%.
Oil futures prices are rising quickly Tuesday morning, as they are up a little over 2% from Friday's close. Contracts for March delivery on the New York Mercantile Exchange, reached $105.44 today, up $2.20 from Friday's close and the highest price since May 5.
In response to the rapid rise in prices and the imminent threat to supply, oil industry companies' stocks have been on a run over the past month in anticipation of their increasing production and being able to raise prices, which means higher profits for them.