The Beach Energy Ltd (ASX: BPT) share price is up 1.07% at the time of writing today to $1.89 a share. That doesn’t sound too impressive on its own, but consider this: Beach shares are now up more than 51% over the past month alone.
In fact, since 2 November, the Beach share price is up an extraordinary 64.3%, making it one of the best performers on the S&P/ASX 200 Index (ASX: XJO) in the month of November.
So what’s going on here to prompt such enthusiastic buying pressure?
Beach shares surf an oil wave
There are only two likely reasons why Beach shares have performed the way they have over the past month or so: higher oil prices and the expectation of even higher oil prices.
Since late October, the price of Brent crude oil has climbed from under US$38 a barrel to the current level (according to Bloomberg) of US$49 a barrel. That’s a rise of close to 30% in just over a month. It’s also the highest level crude oil has traded at since early March, when the oil market was in freefall due to the unfolding coronavirus pandemic.
So we can establish rising oil prices are a factor here. But what of sentiment?
Where is oil going next?
Many commentators are predicting that oil hasn’t finished climbing just yet. A broker note from Goldman Sachs last month shows the investment bank is pricing in oil at US$50–$55 a barrel in 2021.
Another investment bank is even more bullish. As my Fool colleague Brendon Lau covered last month, Credit Suisse reckons that Brent crude could go as high as US$196 a barrel next year, depending on whether the Organization of the Petroleum Exporting Countries (OPEC) decides to maintain agreed cuts in oil production. Even if OPEC relaxes production to pre-pandemic levels, Credit Suisse still sees oil at US$80 a barrel, with US$65 a barrel a base case scenario.
These predictions are still just predictions, and depend a great deal on external factors, such as the rollout of a successful coronavirus vaccine candidate, and rebounds in economic growth across the global economy. But even so, it seems things are looking up for oil overall.
That’s likely the reasons behind this company’s stellar share price performance over the past month or so. We can also see similar performances from other ASX oil companies like Woodside Petroleum Ltd (ASX: WPL) and Oil Search Ltd (ASX: OSH), which lends credence to this thesis.
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Motley Fool contributor Sebastian Bowen 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.
The post Here’s why the Beach Energy (ASX: BPT) share price is up more than 50% over the past month appeared first on The Motley Fool Australia.
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