News

Note from the MD: The Insider: Energy stocks rally as US oil prices hit seven-year highs

October 6, 2021

Note from the MD: The Insider: Energy stocks rally as US oil prices hit seven-year highs

US crude oil prices surged to a seven-year high earlier this week after OPEC, alongside several other oil producers, chose not to accelerate their plans to increase production of the crucial black substance.

US crude oil prices surged to a seven-year high earlier this week after OPEC, alongside several other oil producers, chose not to accelerate their plans to increase production of the crucial black substance.

West Texas Intermediate prices leapt 3% following the meeting, putting the price of a barrel up to US$78 – a price not seen since 2014.

That momentum washed through into the Australian energy sector, which followed suit by climbing 2.44% by close of trade on Tuesday.

It wasn’t just black gold performing well yesterday, though – the regular kind did just fine too. A fall in the US tech sector on Monday night (which was matched by a 10% drop here on Tuesday) and fears about the Chinese property market left the yellow metal red hot.

Gold Road Resources (ASX: GOR), De Grey Mining (ASX: DEG), West African Resources (ASX: WAF), Silver Lake Resources (ASX: SLR) and St Barbara (ASX: SBM) all gained more than 5% during the day.

Even so, the ASX 200 (ASX: XJO) ended the day down 0.4% weighed down by the tech slump and a materials sector wounded by weak trade data.

Further down the market capitalisations, the selling pressure we saw in the XJO was still present. The Emerging Companies index (ASX: XEC) gave up 1.41%  and the Small Ordinaries (ASX: XSO) was down 1.04%.

We expect volatility to remain an important element in the market over the coming days, with Implied Volatility at 17.6%. The XJO continues to trade within its recent downward sloping trading channel, and has been moving closer towards a major support at the 200 DMA (7103). The ADX is slowly rising, suggesting a directional bias in current price action.

Overnight we saw US markets stage a recovery, with the Dow Jones up 0.92%, the S&P 500 up 1.05% and the Nasdaq up 1.25%. Australian futures markets are pointing to similar action here this morning. 

Next week will be an interesting one for data buffs – the Australian Bureau of Statistics will be releasing building approvals figures for August as well as some more labour force numbers and an update to its measuring of CPI in the September quarter.

Wages have become a hot-button issue in the past few months, so it will be interesting to see what comes out of next week’s figures.

One investor who is on the hunt for new opportunities is Luke Winchester, founder and portfolio manager at Merewether Capital and microcap specialist.

Luke will be joining us this Friday, 8th October, at 12pm (AEDT) for The Insider: Meet the Fund Manager webcast, where he’ll provide insights into how he approaches early-stage microcap investing. He’ll also share his three favourite stocks that he believes are ready to take off. To join us for this session, click here.


General Advice Warning

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.

Live Investor Briefing

Learn how regenerative farming is transforming the agriculture industry

Leave a comment