The BHP Billiton Limited (ASX: BHP) share price is up 1.5% in mid-afternoon trading at $23.76, despite the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) trading down 0.1%.
Here are three reasons why the share price is rising today…
The oil price
The oil price surged overnight, with Brent oil rising 2% to US$52.99 a barrel and WTI also staged a rally – rising back above US$50 a barrel. The reason for the rise is that the world's two-largest crude oil producers, Saudi Arabia and Russia, say they are ready to cooperate to curb production levels and limit oil output. Oil prices could reach US$60 a barrel according to some analysts.
BHP generates a significant amount of revenue and earnings from its petroleum division – around a quarter of all group revenues, so any upswings in the oil price are good news.
The iron ore price
Despite predictions of imminent doom in the iron ore sector since the start of this year when the commodity briefly fell under US$40 a tonne, the iron ore price has averaged US$54 a tonne year-to-date (YTD). The wild daily gyrations have ceased, and the price appears to have stabilised suggesting current prices of around US$55 a tonne are sustainable.
Investor sentiment
Investors are returning to the resources stocks after the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) hit five-year lows in January. A general recovery in commodities' prices including iron ore, oil and coal has seen the index soar 33% YTD – with BHP tracking the index and rising over 30% since the start of January. BHP's share price also hit a multi-year low of just $14.06 per share in January.
South32 Ltd (ASX: S32), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Limited (ASX: FMG) are up 140%, 19% and 191% YTD respectively, showing that the gains are broad-based across the major miners.
It's clear that BHP is making all the right moves so far this year to appease investors after destroying billions of shareholders' equity in previous years.
