The OPEC production cut deal has propelled crude oil prices to their highest levels of the past year. While high oil prices are a lifeline for struggling oil and gas production companies, they will also be a drag on profits for a number of other companies.
Every day that passes, it seems more likely that the oil market has bottomed. The oil market will now re-balance over time, even if it takes several years to get there. With oil prices at or below $50 per barrel for the past year, it’s easy to forget that WTI crude spent most of the past decade in the $75 to $100 per barrel range.
Some companies rely so heavily on oil in their businesses that higher oil prices could drive up costs enough to have a serious impact on their stocks. For those companies, the oil downturn has been a blessing. The recovery could be a curse.
With that as a backdrop, here are three companies you should sell before high oil prices go even higher.
Stocks to Sell on High Oil Prices: American Airlines Group Inc (AAL)
For airline stocks, fuel has historically represented roughly a third of total operating costs. Even in a severely depressed oil market, American Airlines Group Inc (NASDAQ:AAL), Delta Air Lines, Inc.(NYSE:DAL), United Continental Holdings Inc (NYSE:UAL) and Southwest Airlines Co(NYSE:LUV) spent a combined $12 billion on fuel in 2015.
Timing the market can be difficult for traders, and it can be just as difficult for companies. Airlines have historically hedged…
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