Santos Ltd [ASX:STO] shares rose 2.6% yesterday, following a sharp spike in oil prices.
The rest of the market may have fallen yesterday, but Australia’s biggest energy producers were clearly leading the charge. Among the companies whose share price also benefited from the oil price surge were Oil Search Limited [ASX:OSH], Woodside Petroleum Limited [ASX:WPL], Senex Energy Ltd [ASX:SXY] and several others.
Why did the price of oil skyrocket?
Apprehension over a major hurricane’s looming presence on the US east coast caused oil prices to rise 3.5%, according to Bloomberg. At time of writing, the price is at US$69.88 a barrel.
Santos has had a promising year in general. Earlier this year, they issued a new and attractive dividend policy designed to pay out in these intermittent oil price booms.
The energy giant has also indicated this year that it’s well on track to achieving its net debt reduction target in the second half of 2018. Not bad for a company who was struggling with a severe level of debt back in 2016.
What’s next for Santos’s share price?
Though the oil price jump might be exciting for some, others may be more cautious. The energy sector is infamously volatile, and particularly vulnerable to global politics.
A looming trade war could be more of a reality than an apocalyptic hurricane. And if this is the case, we could see significant pullback on the company’s shares.
Other companies in the resources sector may be able to offer more diversified options, such as mining titan BHP Billiton Ltd [ASX:BHP].
However, there are many who are bullish on the oil giants and succeed time and time again. As always, the choice is yours.
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