Is this the end of the oil rout?
That's the question being asked by investors around the world right now. After having fallen more than 60% in the space of just seven months – one of the sharpest falls in history – the commodity has risen a staggering 21% over the last four days. It's now fetching US$58.82 a barrel after it rose another 6.9% overnight, which compares to a price tag of just US$48.45 recorded late last week.
One of the key catalysts behind the commodity's resurgence has been the closure of 94 rigs in the United States over the course of just one week. According to Bloomberg, 1,223 rigs remain in operation although hundreds more could be closed over the coming months as high-cost producers are squeezed from the market.
Although a number of analysts still believe the commodity will fall over the course of 2015 – with many suggesting a return below US$50 – confidence is certainly returning to equity markets around the world with some enormous gains being recognised in the energy sector itself.
With its shares up 21.5% today, Senex Energy Ltd (ASX: SXY) has now rallied 43.6% since the beginning of the week, while Sundance Energy Australia Ltd (ASX: SEA) has also jumped 10.7% today. BHP Billiton Limited (ASX: BHP) has extended its resurgence, rising another 4.5%, while Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) are up 2.7% and 1.4% respectively.
Of course, the sudden recovery could just as easily reverse itself which would leave those exposed to the sector hanging high and dry. As such, investors should approach with a high level of caution, but for now, things are certainly looking better for the energy sector.
