Why is the Origin (ASX:ORG) share price hitting new highs today?

The Origin Energy share price is catching bids today amid sector-wide strengths and a rotation back into defensives.

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Australian shares have extended gains for the third straight session today as the benchmark S&P/ASX 200 Index (ASX: XJO) inches higher to 7,477 points.

Gains in the broad indices are led by a rally in defensible pockets of the market today, namely in mining, energy and financial stocks.

For instance, the S&P/ASX 200 Energy Index (XEJ) is up less than 1% on the day whereas the S&P/ASX 300 Metals & Mining Index (XMM) has spiked over 2.5%.

Shares in oil and gas giant Origin Energy Ltd (ASX: ORG) are also crawling higher today and are now changing hands at $5.60 apiece, peaking at its 52-week high in doing so.

After trading sideways for the bulk of 2021, the Origin Energy share price has bounced from a low of $4.78 in December and has since traded in an ascending channel to rally as much as 17.5% in that time.

What’s lighting Origin shares today?

Momentum behind Origin’s share price has been high since it announced the acquisition of community energy services company WINconnect.

The deal is set to provide Origin with an additional 87,000 customers, helping the energy giant reach a total of 367,000 customers.

However, gains for ASX energy shares in 2022 are underscored by strengths in the natural gas markets that has been in situ since January.

Natural gas spot is now trading at US$4.82 per million British thermal units (MMBtu) after rallying more than 35% since December 30.

US Natural gas futures also jumped over 13% yesterday to US$4.8/MMBtu, a 6-week high that is well on course to reach 5-year highs of US$6.1320/MMBtu back in October 2021.

Origin, being one of Australia’s largest natural gas producers and exporters, is set to benefit from the surging prices at the margin and free cash flow level, as has been the case with many commodity juggernauts these past 2 years.

Aside from this, the US 10-year Treasury yield touched 1.8% on Monday resulting in a rotation into more defensive sectors like energy and financials.

The investment research team at JP Morgan offer some interesting insights into this, noting that financials, energy and industrials have the highest correlation with a rising yield on the US 10-year note.

In other words, over the last 5-years, these sectors have tracked the US 10-year yield closely and this helps explain their strength since yields spiked again in 2022, JP Morgan says.

With these points in mind, it appears these are the ingredients to make a flavoursome recipe for Origin shareholders in the early days of 2022 with shares jumping 7% since January 1.

Origin Energy share price summary

In the last 12 months, the Origin Energy share price has climbed more than 8% after rallying almost 12% this past month.

Long-term things aren’t as rosy, with shares making a gradual but substantial walk downwards from highs of $10.15 over the last 5-years.

Should you invest $1,000 in Origin Energy right now?

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*Returns as of January 13th 2022

The author has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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