Shares of Sundance Energy Australia Ltd (ASX: SEA) are soaring higher today. They're up 28.6% at 18 cents (from a closing price of 14 cents), although they did hit a high of 18.5 cents earlier.
Indeed, the company was even forced to respond to a price query from the ASX, which was issued on Friday in response to another strong performance by the shares despite the absence of any news from the company to explain the trading activity. Although, an ASX notice from 1 March stated that Director Eric McCrady had acquired more than 100,000 shares in the business on 23 February, which may have helped spur interest in the shares.
The shares had traded for as little as 7.6 cents on Wednesday last week, and then roared 44.7% higher by the market's close on Friday. With today's gain included, the shares have risen almost 137% in just three days.
For the record, the company said it was not aware of any information that had not been announced that could explain the jumping share price, nor the higher volume of trading. It also said it considers that it is in compliance with the ASX listing rules.
Instead, it seems like the gains could simply be attributed to the rising oil prices, which have soared since bottoming out at a 13-year low in February. One barrel of West Texas Intermediate crude is now fetching almost US$36 – up from around US$26 a barrel last month – while Brent crude is currently fetching more than US$39 a barrel.
Other companies in the sector are also faring well as a result, with shares of Santos Ltd (ASX: STO), Woodside Petroleum Limited (ASX: WPL) and BHP Billiton Limited (ASX: BHP) all up strongly in that time, as well. According to Google Finance, they've gained 9.7%, 2.2% and 11.6% over the last three sessions, respectively.
Of course, investors do need to be careful. Before you even consider buying shares in the sector, you need to ask yourself whether you think the rebound in the oil prices can be sustained, and if you're prepared for potentially large losses if oil prices do fall sharply again. It's a key risk when investing in the commodity sector, and one that needs plenty of consideration.
