The link between crude oil prices and shares of oil-producing companies has weakened. And with the commodity losing a quarter of its value in just six weeks, The Wall Street Journal reports that’s a relief for investors.
Oil bottomed in early 2016 after falling steeply over the previous two years and then rebounded sharply. Prices had roughly tripled by early October, when Brent, the global benchmark, briefly topped $85 a barrel.
Yet the gains for energy companies, especially larger ones, fell well short of that. Hong Kong-listed shares in PetroChina Co. rose just 62% from January 2016 to a high in June. The company, which also has Shanghai-traded stock, has a market value of roughly $200 billion, making it Asia’s largest listed oil major.
In another sign of divergence, many equity prices in the sector notched 2018 highs well before October. PetroChina peaked four months earlier, while its smaller rival China Petroleum and Chemical Corp., also known as Sinopec, hit a high in May. The flip side is less pain during oil’s pullback. PetroChina’s shares, for example, have only declined 14% since Brent crude topped out on Oct. 3.
