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Why energy shares are surging higher

The Australian share market snapped its losing streak on Thursday despite heavy declines in the information technology and consumer discretionary sectors.

The key to this positive performance was a sizeable 1.8% rise in the energy sector.

Here’s how energy shares performed on Thursday:

  • The Beach Energy Ltd (ASX: BPT) share price pushed 5.3% higher to $1.79.
  • The BHP Billiton Limited (ASX: BHP) share price rose 1.8% to $33.82.
  • The Cooper Energy Ltd (ASX: COE) share price was up 2.7% to 38 cents.
  • The Oil Search Limited (ASX: OSH) share price climbed 2% higher to $8.86.
  • The Origin Energy Ltd (ASX: ORG) share price rose 1.3% to $10.11.
  • The Santos Ltd (ASX: STO) share price pushed 2.6% higher to $6.28.
  • The Senex Energy Ltd (ASX: SXY) share price rose 3.5% to 44 cents.
  • The Woodside Petroleum Limited (ASX: WPL) share price climbed 1.8% to $35.68.

Why have energy shares been surging higher?

A significant rise in oil prices has been behind the strong performances of Australia’s leading energy shares.

Since this time two weeks ago the WTI crude oil price has risen a whopping 13% to US$72.63 a barrel and the Brent crude oil price has put on a gain of 6.3% to US$77.65 a barrel.

Oil prices have been on the rise for a couple of reasons. One was OPEC’s decision to lift production by just 1 million barrels per day at its recent meeting. Many in the market were expecting the oil cartel to lift its production by far more.

In addition to this, unplanned supply disruptions in Libya, Canada, and Venezuela and record demand have supported higher prices.

This ultimately led to the U.S. Energy Information Administration reporting a massive 9.9-million-barrel decline in crude supplies on Wednesday for the week ending June 22.

Should you invest in energy shares?

I expect oil prices will remain favourable for some time due to these supply disruptions and the strong demand. However, I do feel a lot of this is already reflected in the share prices of Australia’s oil producers.

Because of this, rather than going for a pure-play oil producer I would consider a diversified miner such as BHP Billiton. As its shares should be less impacted by any sudden decline in oil prices, I feel it is a lower risk way of gaining exposure to the black gold.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.

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