Own ASX 200 energy shares? Here’s why Morgan Stanley says the oil price is set to surge

This ASX expert reckons oil will make some big moves soon…

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a man in a business suit looks at a map of the world above a line up of oil barrels with a red arrow heading upwards above them, indicting rising oil prices.

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Key points

  • ASX energy shares have been some of the market's biggest movers and shakers this year
  • This has been aided by skyrocketing energy prices
  • One ASX analyst predicts oil prices will rise even further

Own any energy shares on the S&P/ASX 200 Index (ASX: XJO)? No doubt you’ve got at least some whiplash from the wild ride this sector has endured so far in 2022. Oil prices have spent this year on a rollercoaster, assisted significantly by the disruptions to the world’s energy markets that the war in Ukraine has brought.

This has seen the value of ASX energy shares — oil shares as well as those involved with gas and coal — seesaw in value over the last few months. But the trend has unambiguously been to the upside. Just take some of the ASX 200’s largest energy shares.

Woodside Petroleum Limited (ASX: WPL) was a $22.67 share at the start of the year. Today, it is going for $30.60 a share, up 35% year to date. Whitehaven Coal Ltd (ASX: WHC) has done even better, rising almost 58% in 2022 so far.

So as most investors would know, the prices of ASX energy shares largely rise or die on the price of energy itself. Namely the oil price. As it stands today, Brent crude is currently at US$103.56 a barrel, according to Bloomberg. But where will it head from here?

MS: Oil heading to US$130 a barrel

Well, we don’t know for sure. But let’s see what one of the ASX’s expert investors reckons. According to reporting in The Australian, investment bank and broker Morgan Stanley has lifted its oil price forecast for the second half of 2022. The broker now sees Brent crude oil at US$130 a barrel by the third quarter of the year, and at US$120 by the fourth. That’s a US$10 per barrel hike on Morgan Stanley’s previous estimates.

In penning these predictions, Morgan Stanley reportedly is assuming a “high risk” that the European Union will impose an oil embargo on Russian energy exports. It is also assuming that stalled negotiations with Iran will not result in significant Iranian oil coming online by the end of the year. Its earlier analysis assumed one million barrels a day of Iranian oil hitting the markets by the end of 2022, but it is now only forecasting 500,000 barrels a day.

So if Morgan Stanley’s analysis proves accurate, it will arguably be very good news for ASX 200 energy shares like Woodside. But we shall have to wait and see what happens with the global oil markets to be sure.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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