Key points
- ASX 200 energy shares have trounced the index this year
- Soaring crude prices could head even higher
- Many OPEC members can't increase production from current levels
The S&P/ASX 200 Index (ASX: XJO) is down approximately 7% since the opening bell on 4 January.
That's despite some outsized gains posted by leading ASX 200 energy shares.
The Santos Ltd (ASX: STO) share price, for example, has gained 11% year-to-date.
Woodside Petroleum Limited (ASX: WPL) shares are up 15%.
And rival ASX 200 energy share Beach Energy Ltd (ASX: BPT) has also gained 15% so far in 2022.
While many factors influence the prices of individual ASX 200 energy shares, the soaring price of crude oil has certainly offered some strong tailwinds.
On 31 December Brent crude was trading for US$77.80 per barrel. Today that same barrel is fetching US$89.40, up 12% to 7-year highs.
And with the pace of new supplies looking to be outstripped by growing demand, crude could march even higher from here, offering more support to ASX 200 energy shares.
OPEC's gradual increase
The Organization of Petroleum Exporting Countries (OPEC) and its partners, including Russia, successfully managed to cut global production after the pandemic saw demand evaporate and Brent crude oil prices plummet to US$21 per barrel in March 2020.
As energy demand rebounded when the world began to reopen, OPEC has been gradually opening up the crude spigots.
Gradually enough to keep oil prices marching higher, and ASX energy shares outperforming the benchmark.
Speaking ahead of yesterday's meeting in Riyadh, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman said (quoted by Bloomberg), "Prudence as I've been preaching about is what saved us in OPEC+. Prudence dictates that you have a bit of a think here and a bit of think there."
During the meeting, OPEC+ members agreed to increase the cartel's production level by 400,000 barrels per day (bpd) in March.
However, with political unrest afflicting several members, and a broader lack of investment impacting production capacity, analysts say many members already haven't been meeting their monthly share of crude output.
As Bloomberg reports:
The 10 OPEC nations engaged in managing supplies increased by 160,000 barrels a day in January, about two-thirds of their targeted amount. The full 23-nation OPEC+ alliance is cutting far more than required, with a compliance rate of 122% in December…
That's led many analysts, including Goldman Sachs Group, led by Damien Courvalin, to offer bullish forecasts for crude oil moving forward, which should come as good news to ASX energy shareholders.
According to Goldman's analysts, "Core to our bullish oil price view is the now historically low levels of the oil market's two buffers: inventory and spare capacity. Even if OPEC+ were ramping up faster, this would only come at the expense of a critically lower level of spare capacity."
How have these ASX 200 energy shares been performing?
As noted above, the 3 ASX 200 energy shares we named have all outperformed the benchmark in 2020.
They've also outpaced it over the past 6 months.
While the ASX 200 is down 5% over the last 6 months, the Woodside share price is up 19%, the Santos share price is up 14%, and Beach Energy shares have soared 25%.
