What’s happening with oil producers?
Oil businesses across the ASX are having a strong day today. The Oil Search share price is up 10% and the Santos share price is up 7.4%.
Our ASX companies can thank US President Donald Trump and his friends for the recovery.
A few weeks ago Russia and OPEC, some of the biggest oil producers in the world, couldn’t agree on a reduced oil production number. Oil demand across the world is lower because of the lockdowns with the coronavirus. Lower demand and the same supply results in lower oil prices.
That’s what we saw. A few days ago the oil price had fallen as low as US$20. But now it’s rebounding quickly. The Tweeter-in-Chief said: “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!”
Lower supply should obviously result in higher prices. But large sections of the world are now in various stages in lockdowns, so I wouldn’t expect the oil demand to get back to where it was a couple of months ago.
Commodity prices are very hard to predict. Which makes resource businesses hard to judge as well. I’d much rather invest in quality technology shares which have easier routes to growth, like these ones:
Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.