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Why Shares of Apache Jumped 25% in June

By John Bromels – Updated Jul 7, 2020 at 10:21AM

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The oil driller's shares went way up, but quickly gave much of it back.

What happened

Shares of oil driller Apache (NASDAQ:APA) rose 25.1% in June, according to data provided by S&P Global Market Intelligence. With the move, Apache's shares extended their winning streak, and are now up 130.4% over the last three months. But that still hasn't been enough to completely erase the company's March losses. Year to date, Apache's shares are down 47.2%.

So what

Apache saw its biggest moves at the beginning of the month: a massive jump between June 4 and 8, and then a gut-wrenching reversal June 10 and 11. 

Oil pours from a golden oil drum.

Image source: Getty Images.

The jump in the company's share price came as OPEC+ leaders agreed to extend their existing production cuts through the end of July. With demand still sluggish due to coronavirus-related travel restrictions, the market breathed a sigh of relief and bid oil stocks upward.

But the enthusiasm was short-lived. On June 10, the U.S. Energy Information Administration announced in its Weekly Petroleum Status Report that inventories of crude oil and refined products like gasoline had spiked in the previous week, at the same time that demand had fallen. That soured investors, who bid down shares, but not quite as much as they had bid them up before.

Although it didn't seem to have an impact on the share price, it's worth noting that Apache officially switched its stock listing from the New York Stock Exchange to Nasdaq on June 9, right between the big jump and the big tumble.

Now what

The oil industry remains a volatile place. If there ever comes a month when OPEC+ isn't able to persuade all its members to maintain production cuts, or if inventories once again rise sharply, shares of oil companies like Apache are probably going to tumble again. 

Apache recently abandoned its Permian Basin operations, and while it could make the decision to restart them, the Permian clearly isn't going to be the cash cow that management once touted. That leaves Apache with some decent North Sea and Egypt operations, but nothing to indicate the stock is likely to outperform. Investors should probably pass on this one. 

John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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