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Here’s why BHP Billiton Limited shares are surging today

What’s happening: Shares of BHP Billiton Limited (ASX: BHP) have started the week on a high note after a strong rebound in oil prices and a stabilising iron ore price. The mining heavyweight rallied $1.13 or 4.2% to be trading at $28.18 per share, helping the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) to rise 1.2%.

Why it’s happening: The miner has come under enormous pressure in recent months as a result of the collapsing iron ore and oil prices. Indeed, the two commodities account for the majority of BHP Billiton’s overall earnings and with both sitting near multi-year lows, even the miner’s progressive dividend policy has been put under the microscope recently.

However, the oil price surged 5% late last week, recording its first weekly increase since November, after the International Energy Agency predicted lower supplies from non-OPEC countries including the Unites States, Canada and Russia. This enabled a sense of optimism within the market that the sector may be closer to resolving its oversupply problem which would pave the way for a recovery in prices.

In addition, according to data provided by the Metal Bulletin Ltd, iron ore is now changing hands for US$68.61 per tonne. Although it retreated by 2c, it seems the price could be stabilising for now with Chinese ports expected to continue restocking inventory in the near-term, providing a temporary sense of relief for those exposed to the sector.

Investors will receive more clarity on the situation when BHP Billiton releases its second-quarter production report on Wednesday.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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