Oil price tipped to reach US$80: Should you buy energy shares?

Analysts at Citi think the oil price could reach US$80 this year. Here's how to profit…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australia's leading energy shares could get a major boost this year if predictions made by analysts at Citi prove to be accurate.

Overnight U.S. oil prices rose to US$63.57 per barrel, their highest level in 2018. But as far as Citi is concerned, prices could still climb significantly higher from here.

In fact, Citi has predicted that a series of macroeconomic events could push oil prices as high as US$80 per barrel. This is almost 26% higher than the current spot price.

According to a note out of the investment bank, war, Middle East tensions, and North Korea are all potential catalysts to moving oil prices higher.

As would the reinstatement of U.S. sanction on Iran. Citi estimates that the reinstatement of these sanctions could add US$5 to the price of each barrel.

This, combined with supply disruptions in Iraq, Libya, Nigeria and Venezuela, could ultimately lead to supply falling by more than 3 million barrels per day.

Which energy shares should you buy?

Although it has run hard in recent weeks, I still think that BHP Billiton Limited (ASX: BHP) is one of the best options in the resources sector. Especially given the positive outlook for iron ore as well.

Energy and iron ore make up a sizeable portion of its overall earnings. So if prices rise for both these commodities, BHP Billiton should be in a position to report strong earnings growth and an increase to its dividend.

Other options in the sector include Santos Ltd (ASX: STO), Oil Search Limited (ASX: OSH), and Woodside Petroleum Limited (ASX: WPL).

But it is worth remembering that these are just predictions from Citi and that there is no guarantee that oil prices will rise to US$80 per barrel. I'm not as bullish as Citi, but feel prices could rise beyond US$70 per barrel this year thanks to positive global economic growth.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »