Marathon Oil Corporation (NYSE: MRO) stock price has risen 145.7% since January and is currently trading at 18-month highs, last seen in April 2019. Here are the reasons behind the rally.
One of the biggest drivers behind the MRO stock price is the rally in crude oil prices that has lifted the stocks of most oil companies just like a rising tide lifts all boats.
The company has benefitted immensely from the runup in global crude oil prices tracked by the West Texas Intermediate, which broke above the $80 level earlier this month.
Another positive factor was that Marathon Oil was relatively undervalued a year ago, and the recent rally has it now trading at a fair valuation, which explains its recent rally.
Oil companies did not expect global demand for the commodity to surge so fast this year, given that many countries carried over the movement restrictions they implemented last year as the coronavirus pandemic spread across the globe.
Furthermore, the aggressive move by most governments in favour of renewable energy sources had led most oil companies to cut their oil output and stop investing in increasing their oil output as they struggled to become carbon-neutral.
However, the recent surge in demand has made policymakers rethink their move towards greener energy. The world is still largely dependent on oil as an energy source, which is unlikely to change soon.
The oil shortages witnessed in many countries have driven up crude oil prices, which is expected to persist for the foreseeable future.
After this year’s rally, many investors are wondering whether we are overdue for a significant pullback. Unfortunately, the answer is yes; we could get a pullback in MRO stock simply because its shares are trading far above the 50-week EMA indicator shown below.
We could get a pullback to the $14 support level, at which point the 50-week EMA line may have caught up to the MRO stock price. However, I do not expect a deeper pullback given the existing conditions in the global crude oil markets.
Investors looking to open bullish positions should wait for the pullback before jumping in.
*This is not investment advice. Always do your due diligence before making investment decisions.
Marathon Oil (MRO) stock price.
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