The Oil Search Limited (ASX: OSH) share price rocketed higher on the opening bell today and is currently up more than 17% in early afternoon trading.
That compares to a 2% gain for the wider S&P/ASX 200 Index (ASX: XJO).
Today's gains continue what's proven to be an excellent month for Oil Search. So far in November, the Oil Search share price is up nearly 29%. Though it still has a long way to go before recouping the losses it suffered following the COVID-19 induced panic selling earlier this year.
Year to date, Oil Search shares remain down 53%.
What does Oil Search do?
Oil Search was established in Papua New Guinea in 1929 and began trading on the ASX in 1999. The company operates all of PNG's oil fields. It owns 29% of the Exxon Mobil Corporation (NYSE: XOM) operated PNG LNG Project, a major exporter to Asian markets. The company also holds interests in the Elk-Antelope and P'nyang gas fields.
Oil Search counts some of the most successful oil and gas operators in the world as its joint venture partners. With PNG's world class fossil fuel assets, the company is well-positioned to expand its LNG capacity.
Why is the Oil Search share price shooting higher?
As with all energy shares, the Oil Search share price doesn't solely rest on how efficiently the company is operating. It's also reliant on the price of oil and gas, and on investors' estimate of how future demand will impact that price.
Today, Oil Search is getting a boost on both fronts.
The announcement from Pfizer Inc. (NYSE: PFE) and BioNTech SE (NASDAQ: BNTX) that their vaccine proved 90% effective at preventing symptomatic coronavirus infections lit the fuse under energy prices.
Brent crude oil prices are up 7.5% in past 24 hours, to US$42.40 per barrel.
And with investors hopeful that the new vaccine will reopen global economies, the outlook for future energy demand paints a stronger potential picture for the price of oil and gas going forward.
Addressing the news of a possible vaccine on energy markets, Stewart Glickman, energy equity analyst at CFRA Research said (quoted by Bloomberg):
This changes everything on the demand side. Assuming it can be produced commercially, it makes it very viable for people to take more risks knowing they have a vaccine.
Michael Tran, a commodity strategist at RBC Capital Markets LLC adds:
At a minimum, what today's news has done is put a floor into the oil market, pushing short sellers away. This is a significant step in the right direction, but there's still headwinds at play … the duration between now and when demand actually returns is still an open-ended question.
As we get a better idea on the reality and timing of rolling out an effective COVID vaccine, the Oil Search share price will be one to watch.
