US energy shares rally to 17-month highs

Energy stocks are on track to close at their highest level in more than 17 months on Monday as oil prices continue their sharp rally following last week’s historic agreement by Opec members to cut production.

The S&P 500 energy index, having ended last week 2.6 per cent higher, rose another 1.4 per cent to 554.21 as prices for both Brent and West Texas Intermediate crude climbed to fresh 16-month highs.

If the index holds on to the gain, this would take it to its strongest closing level since June 2015 and extend its rally since mid-January to more than 42 per cent.

Range Resources led the gains on the index. Shares in the oil and gas explorer and production company rose more than 7 per cent to $38.90 amid speculation that the move by Opec to curtail supply — coming during the winter months in the northern hemisphere when energy demand tends to spike — should further support oil and gas prices.

It was followed by Cabot Oil & Gas and Chesapeake Energy, both up 5 per cent at $23.75 and $7.59, respectively. Southwestern Energy and Transocean rounded out the day’s top five performers as the two clocked in gains of more than 4 per cent.

However, the gains could prove fleeting if non-Opec oil producers, including Russia, Mexico and Kazakhstan, do not join in the cut. Opec will meet producers from outside the cartel on Saturday in Vienna to discuss the supply curbs.

Among the day’s losers, Aetna and Humana were in focus as the two health insurers sought to save their proposed $37bn merger from being blocked by federal and state competition authorities.

Antitrust officials sued to block the planned deal earlier this year, arguing that the tie-up will stifle innovation and consumer choice.

Aetna dropped nearly 4 per cent to $128.23 as the opening argument in the trial got under way on Monday and Humana fell 3.3 per cent to 206.59. UnitedHealth Group, another big health insurer, fell 2.2 per cent.

Elsewhere, investors shrugged off concerns over political instability in Italy to push the Dow Jones Industrial Average to a fresh record high.

The blue-chip index rose as much as 0.5 per cent to 19,274.85 in early trading. The average has risen more than 9 per cent for 2016, propelled recently by a post-US election rally.

The gain comes despite worries the “no” vote in Italy’s constitutional referendum on Sunday could hurt the country’s banking system and spark a contagion that could spill over into the wider eurozone.

US banking stocks were largely sanguine however. The S&P financials index was up 0.7 per cent with Bank of America up 2.2 per cent, Citigroup gaining 1.8 per cent and Goldman Sachs tacking on 1.7 per cent.

The S&P 500 climbed 0.5 per cent to 2,203.85, putting it back on track towards the record high of 2,214.10 reached on November 30. The Nasdaq Composite rose 0.8 per cent to 5,298.95. The tech-heavy index last struck a record high of 5,403.86 on November 29.