Oil Price Decline Drove Up Cruise Line Stock Prices

The sharp decline in oil prices has supported growth in the shares of Carnival and Royal Caribbean. Fuel is one of the major expenses for cruise companies, so its reduction directly impacts their financial results.

WTI crude oil prices fell 7% following market expectations of a deal between the US and Iran. The price of oil per barrel dropped to $78.71, whereas companies had approximately $90 factored into their forecasts.

Carnival benefits the most from the fuel price reduction, as the company does not use a price hedging mechanism. Accordingly, changes in oil prices are reflected in its expenses almost immediately. However, due to market volatility, Carnival remains a relatively risky company.

Royal Caribbean is characterized by a better financial position and higher profitability, which is why analysts consider it a relatively reliable choice for long-term investment. However, the benefits gained from the oil price reduction are reflected in its financial results more gradually and incrementally.

Source: Investing.com