The Australian share market has jumped more than one per cent, driven by a surge in energy stocks after the world’s leading oil producers agreed to cut oil production for the first time in eight years.
The benchmark S&P/ASX 200 index closed 1.1 per cent higher – a one-week high thanks largely to a 7.21 per cent jump in the energy index.
Resource stocks lifted as well, with the materials index lifting 2.88 per cent.
Morgans senior private client adviser Bill Chatterton said OPEC’s decision to cut daily oil production by about two per cent had put a “rocket ship” under oil and gas companies, including Santos, Oil Search, Origin Energy and Woodside Petroleum.
OPEC members overnight agreed to cut production by 1.2 million barrels a day to 32.5 million barrels a day for six months in a bid to erode a two-year global supply glut and to boost prices.
Russia, which is not an OPEC member, also agreed to slightly reduce its oil production.
OPEC’s decision triggered a 10 per cent-plus rally in oil prices overnight, with US West Texas Intermediate crude futures settling at $US49.44 a barrel after passing $US50 during the session.
Santos shares jumped 46 cents, or 11.7 per cent, to $4.39, Oil Search rose 59 cents, or 9.1 per cent to $7.04, Origin added 52 cents, or 8.8 per cent, to $6.46 and Woodside Petroleum gained $1.92, or 6.5 per cent, to $31.54.
Global miner BHP Billiton, which also has a petroleum portfolio, rose $1.20 to $25.60 and rival Rio Tinto added 95 cents to $58.70.
Mr Chatterton said gains in the big four banks were driven by expectations of higher local interest rates “down the track” in the wake of an expected rise in US rates later this month.
Higher interest rates allows banks to charge customers more while they have locked in their borrowing costs for a longer period of time, Mr Chatterton said.
“Banks do better in a rising interest rate environment,” he said.
Commonwealth Bank jumped 88 cents to $79.53, National Australia Bank added 45 cents to $29.38, Westpac gained 38 cents to $31.65 and ANZ rose 27 cents to $28.68.
Engineering group Downer EDI jumped 41 cents, or 7.2 per cent, to $6.08 after securing a $1.7 billion Sydney trains contract.
KEY FACTS:
* The benchmark S&P/ASX 200 index was up 59.7 points, or 1.1 per cent, at 5,500.2 points.
* The broader All Ordinaries index was up 58 points, or 1.05 per cent, at 5,560.4 points.
* The December share price index futures contract was up 61 points, or 1.12 per cent, at 5,503 points, with 41,629 contracts traded.
* National turnover was 3.45 billion securities traded, worth $8.5 billion.
