Shares of Centennial Resource Development (NASDAQ: CDEV) fell as much as 8% in early trading Thursday. The energy sector stock is fairly volatile, so a move like this isn’t too shocking. However, the decline came just one day after the stock rose sharply in early trading, and the reasons for both moves are important to understand.
On Tuesday, a massive container ship got lodged, sideways, in the Suez Canal. Basically, nothing can get through this vital waterway until the ship is moved out of the way. By some estimates, around 12% of global trade flows through the canal, which connects the Red Sea (and thus, the Indian Ocean) to the Mediterranean Sea (and, thus, easy access to Europe). This is a very big deal. Investors were quick to note that the Middle East produces a lot of oil, and that a lot of the tankers that move it travel via that route.
As such, investors bid up the price of energy due to expectations of supply disruptions. Centennial Resource Development’s stock went along for the ride.