PetroChina’s surge looks temporary

The Hang Seng Index was lifted by energy stocks on Thursday, edging it higher by 1.72% towards the key 24,000 psychological level.

Petroleum gas
Source: Bloomberg

One of the key movers was PetroChina which enjoyed a 7% jump yesterday to a one-week high of $8.50.

Another top performer was China Petroleum, which saw its biggest advance in 10 months at 7.6%.

These stocks rose together with the wider energy sector on the temporary rebound of oil prices.

WTI had risen for the second day due to a surprise drop in US crude inventories, where production fell by 3.7 million barrels, against the consensus forecast of a rise of 1.3 million barrels.

Today, reports that PetroChina found an oilfield with over 1 billion tonnes of reserves has further boosted investor sentiment. This helped PetroChina rise in the morning trade session to as much as $8.60.

However, fundamentally, we have yet to see any convincing signs of a revival in the global oil demand outlook to support WTI and Brent prices. Concerns still linger over Europe’s growth, while recent Chinese PMI numbers have continued to be soft. Until this turns around, it will continue to weigh on PetroChina and other oil-related stocks and cap any advances.

From a technical perspective, this is likely to be a brief respite for PetroChina’s stock price, which appears to be respecting its downtrend line.

There are also further headwinds looking at the daily chart, where the 50 daily moving average (DMA) has crossed under the 200 DMA to form a Death Cross. This signals a bearish bias and suggests it will test its support level at around $8.00.

The 20 DMA will be a key level to watch as it is likely to cap any move upwards. Any sustainable turnaround will first need the stock price to make a clear break above it.

Click to enlarge

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.