S&P/ASX 200 Index (ASX: XJO) energy shares have trounced the benchmark in the first quarter of 2022.
Crude oil prices were already in an uptrend heading into the new year. That came as a rebound in global energy demand ran up against limited growth in supply.
Crude prices really took off later in January after oil-rich Russia invaded Ukraine.
This saw Brent crude hit US$128 per barrel on 8 March, up from US$78 per barrel on 1 January. Brent crude remains at multi-year highs, currently trading at US$111 per barrel.
Soaring oil and gas costs have offered little joy to consumers. But ASX 200 energy shares have been amongst the biggest beneficiaries.
Witness the 22% year-to-date increase in the S&P/ASX 200 Energy Index (ASX: XEJ), even as the ASX 200 slipped 1% lower.
While many ASX 200 shares have struggled this year, the Santos Ltd (ASX: STO) share price has gained 19.3%. Woodside Petroleum Ltd (ASX: WPL) shares, meanwhile, have gained a very impressive 44.2% over that same time.
Which has investors carefully eyeing the supply and demand dynamics in energy markets for the year ahead.
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Global oil supply disruption a tailwind for ASX 200 energy shares
The world is looking at oil supply disruptions falling in the range of 5-6 million barrels per day (bpd). That's according to Reuters' calculations.
The shortfall in supply is due to the combination of sanctions on Russian oil exports, conflicts in Middle Eastern oil-producing nations, and a lack of new investment in exploration and drilling since the onset of the global pandemic.
The International Energy Agency flagged that sanctions on Russian oil exports, alongside private buyers refusing to take delivery of Russian sourced oil, is likely to see a 700,000 bpd crude oil supply deficit in the second quarter of 2022.
And these disruptions come as global energy demand is rebounding strongly.
That's likely to mean continued high oil and gas prices, which will help support ASX 200 energy shares in the coming quarter.
In fact, Saudi Arabia is likely to increase the price of its predominant crude variety to a record high.
According to the median estimate in a Bloomberg survey of five refiners and traders, " Saudi Aramco may raise the official selling price of its key Arab Light crude by US$5 a barrel to Asia for May-loading cargoes."
Keep an eye on the demand side too
Investors in ASX 200 energy shares will be keeping an eye on the demand side of the equation as well.
While global energy demand has rebounded strongly, it was only two years ago that COVID-19 driven lockdowns and border closures saw energy demand all but evaporate overnight. That saw crude oil prices crater and ASX 200 energy shares like Santos and Woodside plummet in value.
One of the biggest potential risks to global oil demand analysts are closely watching is the spread of COVID-19 in China.
China is among the few nations still embracing a zero-virus policy. With a recent surge in cases, Chinese authorities have instituted a staged lockdown for Shanghai.
The city, with some 26 million people, has a larger population than all of Australia.
Depending on how the virus and Chinese containment efforts progress, this could have a significant negative impact on crude oil demand in the coming quarter. And that would throw up some headwinds for ASX 200 energy shares.
