Oil prices are holding strong and confidence is mounting over a rally being sustained after the resource piled on more than 3% overnight.
The rally came amidst further concerns from the Middle East as Saudi Arabia and its allies continued to escalate a conflict in Yemen, which could ultimately have an impact on oil supplies from the region. According to figures provided by the Fairfax press, oil prices rose to their highest level of the year with Brent crude, which is the global benchmark, jumping 3.4% to US$64.86 a barrel while West Texas Intermediate (WTI) settled 2.8% higher at US$58.02 a barrel.
Although data from the Energy Information Administration (EIA) shows that crude inventories in the United States are still sitting at their highest level in 80 years, other data shows that production is finally slowing down in response to the closure of several hundred rigs drilling for oil around the country. Many experts believe that output will continue to slow before the end of the year, which could provide a level of support for oil prices.
It seems that investors are becoming more hopeful, too, with shares of a number of Australia's energy and gas stocks rallying in recent times. For instance, Senex Energy Ltd (ASX: SXY) has surged 34.4% in the last month, while Liquefied Natural Gas Ltd (ASX: LNG), Origin Energy Ltd (ASX: ORG) and Sundance Energy Australia Ltd (ASX: SEA) have all strengthened 32.2%, 23.4% and 6.3% in the same time, respectively.
Source: Google Finance
Of course, there are still some headwinds facing the sector which could compromise future returns, but the outlook has certainly become brighter for energy investors.
