Shares in oil and gas giant Santos Ltd (ASX: STO) are edging higher on Friday and now trade 1% in the green at $7.99.
As the commodities super cycle continues in full swing, ASX resources players continue to feel the upside. Santos has spiked almost 27% this year to date after thrusting off a bottom late last year.
What's driving oil markets?
Oil markets continue to surge with Brent Crude now fetching US$99.88 per barrel, having cooled off in recent days. Meanwhile, natural gas prices continue flying and now trade back above 10-year highs.
Driving the rally in oil markets lately is four key catalysts, energy analyst Syed Muhammad Osama Rizvi said in a recent post.
"Wild Swings in oil markets are becoming common with news such as prices falling $11 in one day and $5 in some minutes," Rizvi posted.
"These swings highlight that sentiments are running the show not the fundamentals," he added.
The concerns regarding supply crunch, spare capacity and others are unwarranted or overblown because the downward trend in price in matter of days or minutes cannot mean that these 'structural issues' are resolved.
Following are the main factors driving the markets: (a) Russia-Ukrainian Issue (Escalation, De-escalation); (b) Supply Factors (SPR release, OPEC [and] production); (c) COVID19 (d) Iran Deal; Additional ones: (e) Fed's interest rates; (f) Political [and] economic issues in Emerging Markets.
Santos' little helper
Players like Santos are clearly benefitting from the upside in energy markets this year, something TMF has reported on extensively these past few months.
Yet, whilst uncertainty remains on the future prospects of oil pricing, there's nothing but certainty amongst analysts on whether to buy Santos right now or not.
More than 87% of analysts covering the stock have it as a buy, versus 12.5% for a hold, according to Bloomberg data.
That buy number has crept up from 53% in July last year, whilst the price target has gained exponentially and now rests well above the current share price at $9.26.
That suggests around a 16% margin of safety at the time of writing. Not only that, but the Santos share price and the price of oil has begun to diverge in recent days, which could have some interesting implications. Or not, time will tell.
In the last 12 months, the Santos share price has gained 12% after climbing another 3% this week.
