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 100s 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 whats been happening?
Part of the reason for Tullows 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 companys P/E to around 20.
For Fresnillo, the recession-led addiction to precious metals has turned, and gold and silver prices are down. Fresnillos 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 worlds economies have started to recover, and in the long term their values surely lie in actual industrial demand though in the short term that doesnt stop people who cant 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, Fresnillos primary focus on silver (its the worlds 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 doesnt surprise me that its shares finished ahead of others like Randgold Resources and Polymetal International last week.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Tullow Oil. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.