Oilies and miners have been having a tough time over the past year, with oil and metals prices down. But last week we saw Tullow Oil (LSE: TLW) and Fresnillo (LSE: FRES) soaring towards the top end of the FTSE 100‘s risers with gains of 9% and 6% respectively — Tullow ended Friday on 505p, with Fresnillo up to 763.5p.
As I write today, Tullow is still about the same level at 504p, but Fresnillo has slipped back a little to 748p. So what’s been happening?
Tullow
Part of the reason for Tullow’s rise must lie in the recent uptick in oil prices. Many were predicting a slide as low as $60 a barrel, but suggestions that OPEC might be set to reduce production to try to stem the slide has helped add a little bullishness to the market. And while the world awaits the outcome of a meeting in Vienna this week, the price of crude has picked up to $80.40 per barrel in the past week.
Across the sector, the BP share price is up 3.4% over the past week to 450p while Royal Dutch Shell gained the same to 2,388p.
But Tullow is ahead of the sector, and with its share price down more than 40% over the past 12 months as oil as slumped, its exploration focus could make it a good bet for a medium-term recovery in oil prices — especially as forecasts for 2015 look very strong and would reduce the company’s P/E to around 20.
Fresnillo
For Fresnillo, the recession-led addiction to precious metals has turned, and gold and silver prices are down. Fresnillo’s main asset is its silver mines in Mexico, but it also has significant gold interests in the same country. Prices of both magpie-metals have slumped since the world’s economies have started to recover, and in the long term their values surely lie in actual industrial demand — though in the short term that doesn’t stop people who can’t tell the difference between real productive value and shininess.
But again last week we saw a blip upwards, with silver up to $16.20 per ounce and gold up to $1,195. And there are increasing feelings in the investment business that we could be on for a bull run for gold.
To my mind, Fresnillo’s primary focus on silver (it’s the world’s largest producer of silver from ore) is to its credit, as silver does have significant genuine industrial uses and is more likely to be of real long-term value — and it doesn’t surprise me that it’s shares finished ahead of others like Randgold Resources and Polymetal International last week.