Oil prices have risen a staggering 11% over the last two sessions, sparking confidence within the market that the commodity may finally have bottomed out.
After having hit a fresh six-year low recently – having dropped nearly 60% in just seven months – Brent oil rose 7.9% on Friday and a further 3.3% on Monday to settle at US$54.75 a barrel, according to the Fairfax press. Meanwhile, US crude closed US$1.33, or 2.8% higher at US$49.36 per barrel.
The gains have come as a result of the closure of 94 rigs in the US in the space of just one week, according to Bloomberg, leaving just 1,223 left in operation. Several hundred more are expected to be decommissioned over the next few months which would ease the global oversupply. Meanwhile, the price has also received support from reports saying that the Islamic State terrorist group has advanced in an offensive near Iraq's northern oil fields, which could further impact global supply levels.
While Australian investors reacted hesitantly to the rising price on Monday, they appear to be much more confident in today's session. Senex Energy Ltd (ASX: SXY) has surged 8.8% while Sundance Energy Australia Ltd (ASX: SEA) has risen 6.3%. Some of the other winners include:
- Origin Energy Ltd (ASX: ORG), up 3.4%
- Santos Ltd (ASX: STO), up 3.9%
- BHP Billiton Limited (ASX: BHP), up 2.6%
- Oil Search Limited (ASX: OSH) up 4.2%
- Woodside Petroleum Limited (ASX: WPL), up 2.1%.
Of course, while each of the above companies could soar if the oil price continues to recover, investors need to also consider the risk of further falls if the market cools off again.
