VET:CC - Are energy investors fading the rally in commodity prices?
Over the past month, energy commodity prices built on year-to-date gains. However, not all energy equities participated, and the laggards could surprise market observers. Brent oil (CO1:COM) rose 2% over the past month and is up ~46% ytd. US natural gas (NG1:COM) prices rose 9% over the past month, and are now up 113% ytd. Thermal coal (XAL1:COM) rose by 27% on the month, bringing ytd gains to 132%. In a rising commodity price environment the most challenged producers tend to perform the best. The incremental benefit of high prices to a high-cost producer, or a bad-balance sheet business, is much greater than the benefit of high prices to a low-cost producer with a strong balance sheet. Nevertheless, high-quality oil producers like Hess (HES), EOG (EOG) and Pioneer (PXD) rallied over the past month, while lower-quality peers like Laredo (LPI), Murphy (MUR) and Matador (MTDR) saw share prices fall double
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Are energy investors fading the rally in commodity prices?