Shares rebound as crude surge benefits domestic oil and gas sellers
Shanghai stocks rebounded on Friday as global crude prices surged above US$80 per barrel for the first time in nearly four years following rising geopolitical tensions.
The Shanghai Composite Index climbed 1.24 percent to 3,193.30 points, led by oil and gas companies, with Offshore Oil Engineering Co jumping by the daily limit of 10 percent to 6.66 yuan (US$1.05) and PetroChina rising 7.33 percent to 8.49 yuan.
The two firms are listed companies of China National Offshore Oil Corp and China National Petroleum Corp respectively, both of which are China’s oil and gas giants.
While the Shanghai stock index has dropped in the past two days as investors remained wary over uncertainties with trade talks between China and the US, the rebound today has dragged it back to a five-week high with a growth of 1.24 percent over the past week.
The rebound was boosted by soaring global crude prices, with Brent, the international crude benchmark, rising to a high of US$80.50 a barrel on Thursday and closing at US$79.30 per barrel. That has pushed the index to a near four-year high.
While over the past year crude prices have started to climb after two years’ downturn amid supply cuts among crude exporters, the political tension between the US and Iran has pushed crude prices up by over US$5 a barrel in May alone.
Earlier this month, US president Donald Trump withdrew from the Iran nuclear deal and reimposed sanctions against Iran’s oil and gas sector. Iran’s oil production represents almost 4 percent of global output.
Wang Jun, chief strategic analyst at HuaChuang Securities, said the soaring crude prices have benefited domestic oil and gas sellers, which have posted rebounds in profit across the board in the first quarter.
“Share prices in this sector will keep rising in the coming days, as investors bid uncertainties on the global economy and crude supply will remain for a while,” Wang said.