Where Enservco Corporation (NYSEAMERICAN: ENSV) impressed in yesterday’s trade session, growing 17.71%, it staggered traders in the aftermarket climbing 34.22%. Following the close of trade in yesterday’s session, at a certain point, ENSV ballooned by upwards of a near 40%. The US-based oil management firm is not new to peaks of this nature or magnitude. In fact, ENSV had witnessed shoot-ups of a similar nature at multiple points throughout the month. The stock grew by over 600% in early March, as crude oil prices surged amidst supply uncertainty and growing demand.
Oil Price Movements and ENSV
Crude oil prices soared this month at unprecedented levels owing to the Russian invasion of Ukraine, and subsequent economic sanctions. With the supply of the commodity restricted, and a resurgence in demand with an easing of Covid-19 lockdowns, oil prices surged. As a result, the price of oil barrels crossed unchartered domains, spurring a global wave of inflationary pressures throughout industries. For a fluid management company such as Enservco, these crude oil shifts clearly cause an impact on profitability and growth prospects. Where crude oil price shoot ups do lead to higher revenue, they also drastically increase costs. As a result, ENSV’s other committed domains and projects end up in compromise.
Stabilizing Oil Demand and ENSV shoot up
The crude oil market is evidently undergoing a cooldown, with prices being driven back down to earth. The core reason for this trend is the drop in demand as wide-scale Covid-19 lockdowns are back in the news. With China re-implementing lockdowns on tens of millions, and imposing strict travel restrictions, crude oil is back down. Demand for the commodity is down significantly, as a result, with its largest market heading seemingly heading towards a paralysis. As the giant consumer economy braces itself to face its largest outbreak yet, oil demand plummets.
Stocks such as ENSV are clearly bearing the fruit in this shift, with the stock prices soaring. With prices driven down to more manageable levels, Enservco can once again focus on its financial sustainability. Through improved cost management, market participants are optimistic about the stock.
ENSV is a stock that is highly sensitive to global crude oil movements, given the nature of its business. The market-wide cooldown, caused by Covid-19 lockdowns in China has borne fruit for the stock. The oil management company can better focus on its diversified areas, and control costs leading to growth and sustainability.