FTSE 100 shares tend to behave with relative stability, thanks to the maturity of the underlying businesses. And looking at the past week, that’s precisely what’s happened. However, while the lead index may be relatively flat, some constituents had other plans. With that in mind, let’s look at the top-performing FTSE 100 shares this week and what drove this growth.
- BHP Group (+9.4%)
- Anglo American (+8%)
- Antofagasta (+7.8%)
- BP (+6.5%)
- Glencore (+5.3%)
A quick glance at this list reveals that resource companies are on the march, especially those extracting metals from the ground.
FTSE 100 mining shares leading the charge
Four of the top five performers this week are mining stocks. That’s a pretty clear signal that the industry, in general, seems to be performing well. And it’s not hard to fathom why.
With demand for raw materials rising, combined with inflationary pressure, prices are skyrocketing. And since mining is a largely fixed-cost process, these price increases directly translate into higher margins.
This effect is only being amplified when it comes to battery metals like nickel. Unsurprisingly, the top two FTSE 100 shares this week are both producers of it. For reference, nickel currently sells for $37,200 per tonne. That’s up from $17,344 just 12 months ago.
As exciting as these commodity price trends are, it’s worth remembering that the growth hasn’t gone unnoticed. And with new mining projects being funded to capitalise on the opportunity, supply will eventually catch up with demand, sending metal prices plummeting back down.
Having said that, developing new mining sites doesn’t happen overnight. And that could mean the window of opportunity for my portfolio could remain open for some time. Therefore, I am considering whether now might be a good time to add some mining stocks to my portfolio.
Big oil is getting even bigger
Metals aren’t the only resource with surging prices. BP (LSE:BP), along with almost all oil & gas companies, are enjoying the long-awaited recovery of oil prices, which now stand at around $110 per barrel. So I’m not surprised to see shares of this FTSE 100 firm being popular this week.
Recently, BP hit the headlines after management announced it was disposing of all its Russian assets following the invasion in Ukraine. This move cost around $25bn and effectively wiped out a third of its oil & gas production capacity.
Seeing production fall during high prices is not exactly a great sign. So why is the share price climbing? As it turns out, BP could be about to enjoy a new tailwind.
With Western nations looking to reduce their reliance on Russian gas, the viability of drilling new wells has started to rise. And even the British government has begun meeting with oil executives from industry leaders (including BP) to ramp up production in the North Sea.
With an increasingly favourable operating environment, I’m not surprised to see this stock on the rise. But, for now, I’m staying on the sidelines until a clearer picture of what a post-Russian BP looks like.