October was a volatile month for the S&P/ASX 200 Index (ASX: XJO). Despite a few peaks and troughs, the ASX 200 ended up recording an anaemic loss of 0.1% for the month that was. But let’s take a closer look at one ASX 200 share which had a far more interesting time of it. That would be the Woodside Petroleum Ltd (ASX: WPL) share price.
Woodside is a major player in the ASX 200 Index and is also the largest pure-play oil company on the share market. So how did it do over October? Well, Woodside shares started the month at $23.88 a share. Last Friday, Woodside closed at a price of $23.35. That means that, on paper, Woodside shares recorded a loss of 2.22% for the month.
But that doesn’t really tell us all that happened with this company over the month. Even though the two prices bookended Woodside’s October, the company got as low as $23.26 a share and as high as $25.46 during the period. That’s a difference of around 10%.
Oil prices and a rising dollar hit Woodside shares
Of course, both this volatility and Woodside’s rather poor performance for the month can be blamed on one thing: the crude oil price. Energy companies like Woodside ride or die on the price of crude oil. Since Woodside’s costs are relatively fixed, changes in the oil price can make all the difference to this company’s profitability.
According to Markets Insider, crude oil had a relatively strong month over October. West Texas Intermediate (WTI) crude rose from around US$75 a barrel at the start of the month to more than US$83 by the end. It even spiked as high as US$85 a barrel towards the end of the month before settling down again.
So why didn’t Woodside’s share price react accordingly to the price of oil rising?
Well, it’s possible that a rising Australian dollar helped blunt this tailwind. While oil rose over the month, so did the Aussie dollar against the US dollar. At the start of October, one Aussie dollar was buying around 72 US cents. This had risen to roughly 75 US cents by the end of the month, a rise worth around 4%.
A higher Aussie dollar means it’s theoretically more expensive for Woodside to turn the US dollars it receives for its oil into Australian dollars, handicapping the boost it would be getting from the higher oil prices.