The leaderboard on the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) today is crammed full of energy and oil-producing businesses as investors consider whether now’s the time to go bargain-hunting in the energy sector.
Recent share price rises have been supported by a gradual firming in the price of West Texas Intermediate (WTI) and Brent crude oil around the US$53 and $58 price range, respectively, over the past few trading days. The price lift has been primarily attributed to rising geopolitical tensions in the Middle East and falling rig counts in North America.
Indeed, some investors may have concluded they don’t want to be that guy who did nothing while watching the price of the Black Gold fall to jaw-droppingly low levels, before rebounding higher on tapered supply and solid demand
Well, today’s buyers have lifted the likes of Senex Energy Ltd (ASX: SXY) 10.9%, Woodside Petroleum Limited (ASX: WPL) 0.5%, Santos Ltd (ASX: STO) 0.4%, Drillsearch Energy Limited (ASX: DLS) 3.18% and Buru Energy Limited (ASX: BRU) 10.45%.
But would that guy have been correct to do nothing, or is it time to act?
It’s no secret the political right in the United States would love little more than to see the OPEC group of oil-producing nations fracked by its technologically-advanced shale exploration industry, with low prices an acceptable consequence. Whether this outcome materialises, or OPEC acts to support prices itself is unknown, and oil stocks remain a high risk / high reward play given the uncertain future.
It’s also quite possible that oil may indeed be in a long-term bear market, which means the sector’s one to avoid, but only time will tell.
Personally, I think a little exposure to the energy sector at knock-down prices is prudent as part of a balanced portfolio, although there are other businesses likely to produce far more reliable returns for smart investors…
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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.