What: ASX investors in oil and gas producers are enjoying some solid gains on Monday with a number of stocks jumping in morning trade.
At midday, Santos Ltd (ASX: STO), Origin Energy Ltd (ASX: ORG) and Beach Energy Ltd (ASX: BPT) were all up around 7%.
Meanwhile, heavyweight Woodside Petroleum Limited (ASX: WPL) has gained 4% and Oil Search Limited (ASX: OSH) is up 2%.
So What: The gains in oil stocks come after a jump of around 4% in the oil price last Friday night which limited weekly losses to just 3%.
The relatively small weekly drop in the oil price compares with declines of close to 10% for Santos and Origin last week. This largely explains the "catch up" being played by investors on the ASX today.
Now What: Looking forward and picking the direction of the oil price does remains complicated. With oil at around US$50 a barrel the longer term trend is arguably still up however the time frame for this is murky.
With demand tepid and the supply of energy – particularly LNG to which many Australian producers are particularly exposed growing significantly – the near term fundamentals of the market suggest further volatility could lie ahead.
For very long term investors, the "oil trade" could still be profitable, however, there could be a better entry point. For most conservative investors, it is a sector probably best avoided.
