The Beach Energy Ltd (ASX: BPT) share price is sliding today, down 1.3% in late morning trade to $1.41 per share.
But even with today's retrace, Beach Energy shares remain up 33% over the past month. A month that saw the S&P/ASX 200 Index (ASX: XJO) fall more than 4%.
So, what's been boosting the Beach Energy share price?
Energy demand is outstripping supply
As they teach in economics 101, when demand growth for an asset outpaces new supply growth, you can expect prices to rise.
And this is precisely what we've been witnessing with crude oil, natural gas, and coal prices around the globe.
New crude supplies have been hindered by the COVID pandemic, hurricanes in the oil rich Gulf of Mexico, and limited new exploration over the past year and a half.
The supply crunch comes just as the world begins to reopen. This is driving increased demand for ground and sea transport, along with gradual increases in aviation fuel consumption and industrial energy demand.
The result?
International benchmark, Brent crude prices have stormed higher, from US$72.22 per barrel on 6 September to reach US$81.08 per barrel today. That's more than a 12% price rise.
As you often see with resource producers, their shares tend to gain (or lose) significantly more than any price changes in the commodities they dig and pump from the ground. Hence a 12% rise in crude oil prices has helped to spur the Beach Energy share price to a 33% gain.
Now crude prices did slip from yesterday's multi-year highs, when Brent was fetching US$82.56 per barrel. That fall is likely driven by Russia offering to help supply Europe with much needed gas, and the United States mulling releasing some oil from the nation's strategic reserves.
That fall could help explain why the Beach Energy share price is sliding today.
What's next for the Beach Energy share price?
A range of factors come into play to determine any company's share price.
The Beach Energy share price is no different, with investors examining the quality of management and project reserve estimates, among many others.
But the price of oil and gas certainly will have an impact on the future share price.
And if the Bank of America's analysts have it right, crude oil could be set to top US$100 per barrel for the first time in 13 years.
As Bloomberg reports, "Natural gas prices have already surged to almost double that level in oil equivalent terms, and BofA says a spike in demand for diesel could push crude into similar territory."
The analysts said that with gas prices at such heady levels, crude could get a boost from gas-to-oil switching, along with increased demand for aviation fuel as borders reopen. And all this just as northern winter hits, which sees a spike in demand for heating fuel.
"If all these factors come together, oil prices could spike and lead to a second round of inflationary pressures around the world," the analysts said. Adding, "A multiyear run up in crude oil prices is now in the cards."
If Bank of America has this one right, that will provide a healthy tailwind for the Beach Energy share price.
