Obama to Cease Drilling in the Arctic til 2011; Oil Stocks Holding Up as News Was Likely Already Baked In

With the oil spill in the Gulf of Mexico now turning into an all-out disaster, President Obama today announced that the US will cease drilling in the Arctic until at least 2011. At a press conference earlier, Obama said that even if the leak were halted soon, cleanup and recovery could take months, if not years.

Although the President's decision will certainly have negative implications for numerous players in the oil sector, drilling-related stocks seem to be hanging onto positive territory today. Traders are saying that news of a drilling ban following the BP (NYSE: BP) oil spill has already been priced into these stocks.

As one example of the downside which could be seen by oil companies given today's news, Royal Dutch Shell (NYSE: RDS-A)(NYSE: RDS-B) will like have to revise major plans for Alaskan drilling, specifically, in the Chukchi and Beaufort Seas. The company has already been arguing with regulators since the Gulf incident started, saying that their operations have a lower risk than that of BP's (NYSE: BP) Gulf operations.

A letter from the company sent to the Minerals Management Service said that their wells would be shallower and see much lower pressures that those drilled in the Gulf. The letter also noted that they would heighten safety measures, including testing a critical piece of safety equipment, the blowout preventer, every seven days instead of every fortnight, the current industry standard.

In addition to the cries coming from Big Oil execs, lawmakers in Alaska are upset over the specter of job loss and exportation of U.S. dollars to foreign oil suppliers.

Around the Oil sector today:

• Exxon Mobil Corp. (NYSE: XOM) up 3.2%;
  
  
• BP p.l.c. (NYSE: BP) up 5.3%;
  
  
• Transocean Ltd. (NYSE: RIG) up 1.8%;
  
  
• Chevron Corp. (NYSE: CVX) 3.2%;
  
  
• And the ETF: US Oil Fund (NYSE: USO) up 5%;

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