When the coronavirus morphed into a global pandemic earlier this year, virtually no ASX shares were spared.
Among the hardest hit in the February and March panic selling were ASX energy shares. With airplanes stuck on the tarmac, ships anchored in port, and cars parked in garages, the global demand for oil and gas evaporated. And investors tripped over each other to sell their energy shares.
Woodside Petroleum Limited (ASX: WPL), Australia's largest independent dedicated oil and gas company, saw its share price crash 56% from the beginning of the year through to the 23 March lows.
Santos Ltd (ASX: STO), Australia's second largest oil and gas company, fared even worse. Santos' share price plummeted 67% from 2 January through to its own low on 19 March. That's more than twice the losses of the broader S&P/ASX 200 Index (ASX: XJO), which fell 32% from the start of the year through to 23 March.
The first share price turnaround
While company management and the assets they own play a large role, ASX energy shares like Santos and Woodside are also highly correlated to the price of oil and gas. So, it's no surprise that their shares were tumbling as Brent crude prices also fell to multi-year lows.
On 2 January, Brent crude was trading for US$66.25 (AU$90.30) per barrel. By 23 March, that had dropped to US$27.03 per barrel. And Brent would continue to sell off until 21 April, when it bottomed at US$19.33 per barrel.
From there Brent climbed rapidly. The black gold hit US$43.08 per barrel by 22 June as Europe and the US reopened for northern summer, and OPEC kept the brakes on any output hikes.
By 9 June, Santos' share price was up 124% from its 19 March low. Woodside's share price also soared into 9 June, up 64% from its 23 March trough.
From there, both shares lost ground through to the end of October, with Santos's slipping 23% through to 1 November and Woodside shares falling 29%.
Meanwhile, Brent crude prices had fallen 13%, ending October back down at US$37.46 per barrel.
The second share price turnaround
Then came the announcements of not 1 but multiple likely effective vaccines.
With the prospect of a global reopening seemingly within sight, energy prices rallied. Brent crude has leapt 29% since 30 October, currently trading for US$48.25 per barrel.
As for our top ASX energy shares?
Woodside's share price is up 30% since the beginning of November. And Santos' share price is up 33%.
Now all eyes are on the Organisation of the Petroleum Exporting Countries (OPEC).
Will OPEC+ deliver more share price gains for Santos and Woodside?
OPEC+ (which includes Russia) is currently debating a new deal on its oil production limits in 2021.
Battling a surge in US shale oil production, OPEC+ had introduced significant production cuts before the pandemic struck. And the group has since extended those cuts, helping stem the oversupply during a time of much weaker demand.
The future of those cuts should be known by the weekend, as members meet again today (overnight Aussie time). And their decision is likely to have a significant impact on crude prices, and therefore the share prices of ASX 200 energy majors like Santos and Woodside.
As Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC, puts it (quoted by Bloomberg):
At least in the short- to medium-term, it's all been about OPEC. Demand is going to be hit for at least the next few months. If OPEC does not get an extension on the cuts and compliance of these cuts, oil could head a lot lower.
With both the Santos and Woodside share prices trending higher today, ASX investors will be keeping a close eye on OPEC's pending announcement.
