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Highlights
- Oil prices have been rallying for the past six straight days on tight supply and as demand continues to rise amidst a global recovery.
- Brent crude futures rose to three-year highs, almost touching US$ 80 per barrel.
- The continuing surge in gas prices has further pushed oil prices higher as oil is increasingly being used as an alternative fuel source in the UK.
Oil prices has been on an uptrend for the past week due to continuing increase in demand. Brent crude oil opened trading just below US$ 80 per barrel today, a three year high last seen in October 2018.
Brent crude December futures were trading at US$ 79.41, up by 0.88 per cent today at 10:35 AM GMT+1.
Rising oil prices have been driven by a tight supply of oil, surging gas prices, and demand recovery. British banking major Barclays PLC (LON: BARC) released a report today forecasting Brent crude to rise to US$ 77 per barrel in 2022, up by US$ 9 from an earlier estimate.
FTSE Oil & gas Stocks to Buy Amid Rising Global Oil Prices
The higher prediction is also partially due to investors having a lower degree of confidence in a US-Iran nuclear deal being revived once again.
Another investment bank and research firm Morgan Stanley also estimate oil to trade around US$ 85 per barrel, expecting a continued supply deficit in 2022.
The Organization of the Petroleum Exporting Countries and allies (OPEC+) group maintaining the production cuts for the July output has added to the supply deficit.
Meanwhile, UK’s wholesale natural gas prices surged to a new record high today as the gas shortage continues to deepen. Natural gas October futures were trading at US$ 211.50 on 28 September 2021, up by 11.094 per cent.
The UK has been facing a major gas crisis, with several energy companies going bust as they are unable to withstand the price shocks. This surge in gas prices has thus increased oil demand as an alternative source of fuel.
Let us take a look at 3 FTSE listed stocks in the oil and gas sector and how they reacted to the development:
- Royal Dutch Shell PLC (LON: RDSB)
FTSE 100 index listed company Royal Dutch Shell is a UK based oil giant. It was among one of the highest gainers in the FTSE 100 index today, along with another oil major, BP PLC (LON:BP)
The group’s shares hit an 18-month high on Monday and continued to extend gains today, driven by the recent rally in oil prices.
Royal Dutch Shell’s shares were trading at GBX 1,635.00, up by 2.51 per cent on 28 September at 11:36 AM BST, while the FTSE 100 index was trading at 7,029.57, down by 0.48 per cent.
The company has netted shareholders a one-year return of 68.30 per cent and has a market cap of 58,420.64 million as of 28 September 2021.
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- BP PLC (LON: BP)
BP is another FTSE 100 index listed British oil giant. The company expect oil demand to reach pre-pandemic levels by Q3 2022, with the Asian region remaining the main driving force behind oil demand.
The group expects average 2022 oil demand to rise by 3.8 million barrels per day (bpd) on a yearly basis, slowing from 5.4 million bpd in 2021.
BP’s shares were trading at GBX 339.10, up by 2.35 per cent on 28 September at 11:59 AM BST, while the oil and gas sectoral index was trading at 7,029.57, down by 0.48 per cent.
The company has a market cap of £66,364.89 million and has netted shareholders a one-year return of 44.60 per cent as of 28 September 2021.
- Harbour Energy PLC (LON: HBR)
FTSE 250 listed firm Harbour Energy is an independent oil and gas company. The company reported its H1 2021 results recently.
It reported a profit after tax of US$ 87 million in H1 2021, compared to a loss after tax of US$ 155 million in H1 2020.
Harbour’s shares were trading at GBX 376.40, up by 0.86 per cent on 28 September at 12:13 AM BST, while the FTSE 250 index was trading at 23,216.54, down by 1.66 per cent.
The company has a market cap of £ 3,454.09 million and has netted shareholders a one-year return of 17.01 per cent as of Tuesday.
Bottom Line
The recent rally in oil prices has boosted shares of oil majors. And given that supply is expected to be constrained for another year, oil and gas companies can expect to see it reflected in their revenues.
Investors keen to increase their exposure to oil stocks should also keep an eye on international news such as OPEC+’s forthcoming announcements on production output and on the UK’s handling of its energy crisis.
