Santos Ltd surges to $8: Is there still a buying opportunity?

Santos Ltd (ASX:STO) is enjoying investor support today thanks to a spike in the oil price and a positive announcement from the company.

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What: Oil and gas major Santos Ltd (ASX: STO) is enjoying some buying support today with the share price spiking 2.6% by mid-afternoon on Friday to a one-and-a-half-month high of $8 a share.

It comes as welcome relief for shareholders who watched in horror as their shares languished as low as $6.92 earlier this month.

So What: There would appear to be three drivers of the spike in Santos' share price today.

Firstly, general market momentum has seen the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) put on a solid 1.5% on Friday, which should help see the index close out the week's trading with a gain of approximately 0.9%.

Secondly, the oil price jumped overnight to its highest level this year, with the price of Brent oil up 3.4% to US$64.86 per barrel on Middle East tensions.

Thirdly, Santos reported this week that its massive Australia Pacific LNG (APLNG) project has powered up its first gas generator, which marks a significant milestone for the multi-billion dollar project. Eventually, Santos will need to bring seven gas turbines on line to provide electrical power to the facility and drive its two LNG processing trains.

Now What: It's quite possible that the oil price low is now behind investors. While those lows might be re-tested and while it could be some time before the price moves significantly higher, arguably a floor may have been established.

The end of the decline in the oil price will obviously be a positive for Santos and the oil and gas sector in general, however, the major game changer specifically for Santos remains the start-up of APLNG. News of the powering-up of the first gas generator brings the facility one step closer to start-up, and provides an added level of comfort to shareholders that the project will remain on time and on budget.

Despite the share price rally from the $7 level to the $8 level, Santos remains at a multi-year low and down 40% over the past 12 months. As such, investors would be well advised to remain focussed on whether they believe there is long-term value in the stock, or whether they have missed a short-term opportunity.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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