Oil Search Ltd [ASX:OSH] shares were up by over 1.5% this morning, following a sharp spike in oil prices overnight.
The price of gold might be down, but Australia’s energy sector appears to be clearly leading the charge. Companies whose share price has also benefited from the oil price surge include Santos Ltd [ASX:STO] and Woodside Petroleum Ltd [ASX:WPL].
Why has the price of oil skyrocketed?
Bloomberg’s calculations cites the WTI crude oil price to have climbed a further 0.4% so far today to US$57.00 a barrel, while the Brent crude oil price also is up 0.25% higher so far to US$64.08 a barrel.
Some analysts find the price rise surprising, considering the multiple geopolitical tensions at play. Conflict mounted between Iran and the West last Friday after Tehran revealed it had seized a British-flagged oil tanker.
But the hostility muddying the world’s busiest oil-shipping route clearly hasn’t marred oil prices. It’s been reported, in fact, that US shale producers are benefitting from the fray, due to their oil fields and tankers partly filling the void.
Oil supply disruptions continue in hot spots around the world, with the shutdown of Libya’s largest oil field taking place on the weekend just passed.
What’s next for Oil Search?
Though oil prices might seem like they’re staying afloat, taking a broader look at the movements shows an overall downtrend in West Texas Intermediate crude-oil-futures prices since April. The energy sector is infamously volatile, and particularly vulnerable to global politics.
A looming war between the Middle East and the West could be more of a reality than the media storm might imagine. And if this is the case, we could see significant instability in all Aussie oil stocks, not just Oil Search.
However, sometimes it can pay to be bullish on the oil giants. I know many who are, and succeed time and time again. But it depends on how much risk you can stomach.
Wise investors will keep abreast of emerging reports.
For Money Morning
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