What happened

Shares of onshore U.S. exploration and production company Centennial Resource Development (NASDAQ:CDEV) rose as much as 5% on Feb. 4. The stock had pared that a touch to a 4% rise by roughly 2:30 p.m. EST. However, Centennial wasn't alone. For example, Callon Petroleum (NYSE:CPE) rose over 5% at the open, lost most of the gain, and then started to turn higher again. By 2:30 p.m. the price was up around 3%. SM Energy (NYSE:SM), meanwhile, basically trended higher through most of the day, reaching a gain of roughly 6% by 2:30 p.m. 

So what

The news driving these U.S. energy companies wasn't complicated. Oil and natural gas prices were on the rise, and as you would expect, investors bid up the shares of the companies that produce the fuels. Nothing special about that.

Two workers next to an oil drill

Image source: Getty Images.

However, from a bigger-picture perspective, the energy markets continue to move toward a better balance between supply and demand. Notably, global inventories of oil, built up when demand cratered in the early days of the pandemic-driven economic shutdowns, is starting to fall. And OPEC, particularly Saudi Arabia, looks like it wants to hold the line on production levels to ensure that supply doesn't come back online too quickly as energy prices start to stabilize at higher levels. With oil in the mid-to-high $50 range, that's a material issue for investors to monitor, particularly in the onshore U.S. space. U.S. drillers have professed a desire to focus on cash flow over production growth, but it remains to be seen if that resolve holds. So far, however, it seems that producers, even the U.S. wildcatters, are remaining disciplined.   

Now what

Basically, the rise in Centennial Resource Development, SM Energy, and Callon Petroleum makes sense given the rise in oil and natural gas prices today. But the real takeaway here is that the supply and demand situation in the industry remains supportive of current prices and, if the recent trends continue, perhaps even higher prices down the line. While one day's price move isn't enough to make a trend on its own, it does actually look like a trend is starting to build one day at a time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.