Oil prices soared more than 5% on Monday as the market's concerns regarding the Iran nuclear deal eased. West Texas Intermediate (WTI) crude surged 6.1% to US$52.14 a barrel, according to the Fairfax press, while the global benchmark Brent crude rose 5.8% to US$58.16 a barrel.
The resource's price has fallen considerably recently as a result of a pending nuclear arrangement between Iran and other world powers, including the United States. Had a deal been reached, Iran could have released up to 30 million barrels of oil into an already oversaturated market, while it had also indicated its intentions to increase its output by up to one million barrels of oil per day.
However, the market appears to have reassessed just how quickly Iran might increase those exports after the countries agreed on a framework accord over its nuclear program. At the same time, there are signs that an extended rise in US crude inventories may finally be slowing as a result of the closure of several hundred oil rigs across the nation.
That is great for oil producers around the world as the market's oversupply has been forcing the resource's price lower since June last year. Here's how some of Australia's producers are responding to the rise in oil prices overnight:
- BHP Billiton Limited (ASX: BHP) up 1%
- Santos Ltd (ASX: STO) up 2.3%
- Woodside Petroleum Limited (ASX: WPL) up 0.9%
- Senex Energy Ltd (ASX: SXY) up 4.8%
- Liquefied Natural Gas Ltd (ASX: LNG) up 3.6%
- Oil Search Limited (ASX: OSH) up 1.7%
Before you get too carried away with buying into the sector however, you should know that many analysts still believe oil prices have further to fall, which would likely lead to even more pain for our producers. The oil sector is by no means for the faint of heart and more risk-averse investors would be better focusing their attention on some of the market's other compelling opportunities.
