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Energy shares rise as oil reaches US$60 a barrel

It certainly has been a positive start to the week for many of Australia’s leading energy companies.

In afternoon trade the energy sector is pushing meaningfully higher, playing a key role in the positive start to the week being had by the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

Here’s the state of play in the sector at the moment:

  • The BHP Billiton Limited (ASX: BHP) share price is 0.7% higher to $29.30.
  • The Beach Energy Ltd (ASX: BPT) share price has climbed 1.5% to $1.20.
  • The Oil Search Limited (ASX: OSH) share price is up 0.8% to $7.72.
  • The Santos Ltd (ASX: STO) share price 1.5% higher to $5.40.
  • The Senex Energy Ltd (ASX: SXY) share price is up 3.5% to 38 cents.
  • The Woodside Petroleum Limited (ASX: WPL) share price is up 1% to $33.03.

What happened?

Today’s gains appear to be related to the Brent crude oil price reaching US$60 a barrel overnight following reports of an explosion on a Libyan pipeline. This is the first time since 2015 that the Brent crude oil price has reached this level.

According to CNBC, supply will lose an estimated 90,000 barrels a day from this disruption. This equates to almost 10% of Libya’s output and comes at a time when the market has tightened due to increased demand.

While this is good news for oil producers, it isn’t for those that consume it. The shares of Qantas Airways Limited (ASX: QAN), Virgin Australia Holdings Ltd (ASX: VAH), and Air New Zealand Limited (ASX: AIZ) are all lower on the news.

What now?

While I suspect the oil price will give back some of these gains over the next few weeks, I still see a lot of value in BHP Billiton due to the improved outlook for commodity prices in 2018. All in all, I believe it has a good chance of beating the market next year.

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