PetroChina's Shares Surging As Oil Prices Rally

Daniel LipsonJan 24,2018,21:58

PetroChina Company Limited (NYSE: PTR), a China-based company focused on producing oil and gas, saw a big boost of up to 7.5 percent today as oil prices rallied in what’s usually the slow season in the oil industry. The jump marks the largest gain for the company in the past two years.

Currently, oil is just over $64 a barrel, 10 percent higher than it was a month ago. High oil prices are unusual for winter, as winter weather often leads to less driving and less demand, but average crude oil has been increasing in price as global supplies decrease. Increased U.S. production has helped to steady some of the costs, but springtime maintenance shutdowns will likely put more pressure on prices.

PetroChina has not released earnings for the latest financial year, but posted total third quarter revenues of around RMB 480,000 million, an increase of more than 17 percent from the previous year. Over the past five years, PetroChina has dropped nearly 50 percent, but it is now gaining back some traction from investors who are eyeing catch-up plays.

A number of large investors have boosted their holdings by over 7 percent in the past year, including Bank of New York Mellon, Jane Street Group LLC, and Trexquant Investment LP.

PetroChina’s profits are affected by government price-capping, which prevents them from passing on high refinement costs to its customers. The group has been working to enact strict cost control initiatives to offset these losses, but the company posted disappointing performance both upstream and downstream.

Another one of PetroChina’s obstacles comes from competitors such as China National Offshore Oil Corporation (NYSE: CEO) and Sinopec (NYSE: SNP), who both saw strong third quarter earnings as the price and demand for oil increased.  

The rallying price and demand of crude oil and gas should be a good indicator of the potential for PetroChina to rise in value over the coming year, if they can improve their upstream and downstream performance to keep up with competitors.

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