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Highlights
- Tropical storm Ida has formed over the Caribbean and is expected to reach Cuba today.
- The storm is expected to form into a powerful hurricane and make landfall in the US states of Louisiana or Mississippi on Sunday or Monday.
- Several oil majors such as Shell, BP and others have shut production due to the threat posed by storm Ida.
Tropical storm Ida is expected to become a strong hurricane over the Gulf of Mexico in the coming days. The tropical storm is expected to reach Cuba today and morph into a hurricane grade strength tomorrow. It is eventually expected to make landfall in the US coast on Sunday or Monday.
There has been an increasing occurrence of extreme weather events in recent years due to climate change effects, and it is only expected to become more frequent in the coming years.
Ida is the ninth storm in this year’s Atlantic hurricane season; it currently has a wind power of 40 miles per hour (mph) which is expected to reach a peak of 110 mph. According to US based hurricane tracker, the National Hurricane Center, tropical storm Ida is expected to be at least a category 2 hurricane by when it makes landfall in the US.
Oil prices rose today due to investors anticipating the storm will disrupt oil production. Brent November 2021 crude oil futures were trading up by 1.58 per cent at USD 71.29 today at 08:15 AM GMT+1.
This increase in oil futures comes after a volatile price movement this movement due to rising Delta variant cases in Asia, concerns over OPEC increasing output over tightening supply and other factors.
Let us take a closer look at 3 FTSE listed stocks in the oil and gas sector and how they have reacted to the news:
- Royal Dutch Shell PLC (LON: RDSA)
FTSE 100 index listed oil major Royal Dutch Shell said on 26 August that it shut production at four of its Gulf of Mexico offshore platforms, namely Ursa, Mars, Olympus and Appomattox.
The oil giant also evacuated all of its workers from the area ahead of the tropical storm Ida being forecasted to making landfall in the coming days.
Shell also said it plans to disconnect and move its offshore floating production system Turritella from the storm’s forecasted path.
(Image Source: Refinitiv)
Royal Dutch Shell’s shares closed at GBX 1,432.20, down by 0.01 per cent on 26 August, while the FTSE 100 index ended at 7,124.98, down by 0.35 per cent.
The company’s market cap was at £58,746.15 million, and its one-year return stood at 27.67 per cent on 26 August.
- BP PLC (LON: BP)
Another FTSE 100 index company BP is a British oil giant. BP, similar to Shell, announced the shutting of four production plans and evacuation of its workers in the Gulf of Mexico region ahead of the storm.
BP also received approval from the Iraqi government on Thursday to spin off its Rumala oilfield. The move is expected to further support BP’s shift towards low carbon energy assets.
The newly formed spun-off firm, Basra Energy Ltd, will be a joint venture with China National Petroleum Corp and BP.
(Image Source: Refinitiv)
BP’s shares closed at GBX 296.55, down by 0.60 per cent on 26 August. Meanwhile, the fossil fuels sectoral index ended at 5,100.53, down by 0.24 per cent.
The company’s market cap was at £ 60,095.00 million, and its one-year return stood at 9.53 per cent on 26 August.
Related Article: Lloyds Bank (LON:LLOY) and BP (LON: BP.): 2 top FTSE 100 stocks to buy
- Wood Group (JOHN) PLC (LON: WG.)
FTSE 250 index constituent Wood Group is a UK based energy engineering and consulting firm involved in upstream, mid-stream and downstream oil and gas producers and other energy solutions.
The company’s H1 2021 revenue fell by 22.9 per cent to US$ 3.2 billion, down from US$ 4.1 billion in H1 2020. The drop was due to the pandemic and also from a reduction of about $74 million from its disposed businesses.
It expects FY 2021 revenue guidance to be between US$ 6.6 billion and US$ 6.8 billion due to improving trading activity and strong growth in its order book.
(Image Source: Refinitiv)
Wood’s shares closed at GBX 251.20, up by 0.48 per cent on 26 August. Meanwhile, the FTSE 250 index ended at 23,952.39, down by 0.14 per cent.
The company’s market cap was at £ 1,720.85 million, and its one-year return stood at 5.46 per cent on 26 August.
Related Article: Oil and gas sector: 4 lesser-known FTSE listed stocks to buy
Bottom Line
Investors will be keenly watching oil and gas stocks that have exposure to the Gulf of Mexico, such as Shell and BP, as these companies are expected to have their production impacted.
However, oil investors can also expect cues from the US Federal Reserve’s upcoming bond purchase updates and the OPEC+s oil supply meeting scheduled to be held next week, which will grant a clearer view on the upcoming global oil supply.
