What happened to the Origin share price?
After climbing off the canvas in January, shares of Origin Energy [ASX:ORG] rocketed from a low of $3.44 to hit $5.50 by the middle of March — a 60% move in only two months. Mind you, having fallen from a 2015 high of $11.60, long term Origin shareholders have had little to cheer about.
Since March, though, the ORG share price has again hit the skids. Trading as low as $4.41 today, Origin has fallen around 20% over the last four weeks.
Why did ORG shares do this?
Much of the damage to Origin’s share price over the last year has come off two major themes: one was its exposure to the Australian Pacific LNG project, of which it is a one-third investor. The huge capital required to build this ($25 billion-plus) was incurred just as the second major theme played out — the huge drop in the price of oil.
However, along with the first shipment of LNG in January came some more positive news. Origin announced a new contract to supply trading company ENN. Although non-binding, the deal is still expected to be finalised later this year.
And the price of oil bounced dramatically off its recent lows.
What now for Origin Energy?
With the gas price linked so closely to the price of oil, this remains the biggest catalyst for the direction of Origin’s share price. A jump in the price of oil, and the Origin share price goes up. Any fall in oil, and the share price quickly follows suit.
While some more positive news has emerged recently about drops in oil inventories around the world, the industry appears to be stuck in a structural state of oversupply. Just as the oil price creeps up, so too does the supply from the producers as they turn back on the taps.