Crude futures for February delivery rose today, eclipsing the US$80/barrel mark in anticipation of a continued economic recovery and higher energy demand in 2010. Benchmark crude for February delivery closed at US$79.36/barrel on Thursday before the New Year break and cleared the US$80/barrel mark on the New York Mercantile Exchange (NYMEX) today before rallying to US$81/barrel by midmorning London time.
February Brent Crude also improved, climbing within sight of US$80 and settling at US$79.65/barrel by midmorning on the ICE Exchange.
Oil prices have risen by a total 78% in the past year, following a dramatic decline from the level of nearly US$150/barrel in August 2008.
The unusually cold weather that has been witnessed in Europe and China over the past few weeks further strengthened optimism about energy demand, contributing to the price increases.
Other factors included last week’s Chicago PMI (purchasing Managers’ Index) update, which showed an increase to 58.7 in December from 55.5 in November, signalling an improvement in business activity in Midwest and marking the biggest increase in 20 months. Investors will be eyeing the US ISM (Institute for Supply Management) manufacturing survey due out today and a monthly jobs update, which will be released in the US on Friday.
Oil and gas stocks responded positively to the increase in prices as all sector majors posted gains in the morning.
Cairn Energy (LSE: CNE) took the lead, advancing 5.5%, while BG Group (LSE: BG) followed with a 1.4% gain.
Supermajors BP (LSE: BP) and Shell (LSE: RDSB) added 1%, as did another FTSE 100 constituent Tullow Oil (LSE: TLW).
Oil and gas services company Amec (LSE: AMEC) did well, climbing 1.5%, while peer Petrofac (LSE: PFC) rose marginally.
Salamander Energy (LSE: SMDR) was the top performer among the midcaps with a gain of nearly 4%. Fellow FTSE 250 energy producer Heritage Oil (LSE: HOIL) also added more than 3.5%, while Dana Petroleum (LSE: DNX) and Premier Oil (LSE: PMO) climbed 2.5%, JKX Oil and Gas (LSE: JKX) and Soco International (LSE: SIA) improved 1.3%, while another midcap Dragon Oil (LSE: DGO) posted a marginal gain.
Midcap service companies did well with Wellstream Holdings (LSE: WSM) and John Wood Group (LSE: WG) tacking on 5.5% and 2% respectively.
Kazakhstan operating Max Petroleum (LSE: MXP) led the small caps with a 12% surge. Ukraine focused gas producer, Regal Petroleum (AIM: RPT) followed with a 6.5% climb, while EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) and US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) gained 5% and 3% respectively.
Irish oil and gas exploration company Petroceltic International (AIM: PCI) headed in the opposite direction, shedding 8% on no news.