ASX energy shares could boom if OPEC has this one right

If you thought OPEC had lost its pricing powers over global oil markets, think again.

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Capex business spending Surging ASX share price represented by the word BOOM written on bright yellow background

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ASX energy shares got pummelled during the first months of the global pandemic, pressured by nosediving crude oil prices.

As much of the world began locking down in February last year, global oil demand to power everything from shipping to personal vehicles to air travel came to a grinding halt.

This saw Brent crude oil prices fall from more than $68 per barrel in early January 2020 to less than $22 per barrel in the last week of March 2020.

Little wonder then that ASX energy share Senex Energy Ltd (ASX: SXY) saw its share price crash 55% in that same time. Rival ASX energy share Santos Ltd (ASX: STO) wasn’t spared either, falling 64% over that same time.

While investors who sold near the lows are likely still smarting, those who picked shares up on 20 March 2020 have something to crow about. Santos is up 125% since the lows. Senex shares have gained 152%.

Now those kinds of gains are unlikely to be repeated in that short of a time frame any time soon.

But if the boffins running OPEC+ (which includes Russia) have it right, ASX energy shares could be well-positioned to outperform in the second half of the year.

Crude stockpiles are dwindling

OPEC+ thinks that the pandemic driven glut in global oil supplies is nearing its end. And with the world beginning to reopen as the pace of vaccinations picks up, resurgent demand could well outstrip any gradual increases in supply greenlighted by the organisation.

According to Bloomberg:

OPEC’s Joint Technical Committee estimated on Monday that by the end of July stockpiles in developed nations will be below the average levels seen during 2015 to 2019… Between September and December, inventories will be depleted at a brisk clip of more than 2 million barrels a day.

Louise Dickson, an analyst at consultants Rystad Energy, noted, “The market is now facing the exact opposite dilemma of April 2020. Producers now have just as delicate of a task to bring back enough supply to match the swiftly rising oil demand.”

Dickson added, “If markets over-tighten, a flare-up in prices could jeopardize the global economic recovery.”

While overly high oil prices could certainly constrain the wider economic rebound, they’d almost certainly be welcomed by ASX energy shares.

Of course, plenty of uncertainties remain for crude oil prices in the months ahead. Chief among those is how well the world handles COVID-19. In recent weeks the virus has rebounded alarmingly in parts of Asia and South America. That could well dampen any forecast growth in oil demand if not brought under control.

Then there’s Iran. The oil-rich nation is looking at regaining access to global oil markets if the United States lifts crippling restrictions imposed under the Trump administration over its nuclear ambitions.

OPEC, however, doesn’t intend to let Iran upset the proverbial apple cart. As Bloomberg notes:

OPEC’s Barkindo signaled at the JTC meeting that Iran’s comeback “will occur in an orderly and transparent fashion,” causing no upset to the stability that other OPEC+ nations have toiled to achieve.

2 ASX energy shares in a snapshot

Senex Energy shares are up 2.2% in late afternoon trading, putting shares up 28% year-to-date.

Santos shares are up 1.9%, with the Santos share price now up 7% year-to-date.

By comparison the All Ordinaries Index (ASX: XAO) is down 0.2% today and up 6% so far in 2021.

Santos has a market cap of $14.1 billion and pays a dividend yield of 1.3%, fully franked.

Senex is on the smaller end of the ASX energy share scale, with a market cap of $580.5 million. Senex pays a dividend yield of 1.3%, 96% franked.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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