The Origin share price is absolutely smashing the ASX 200 in 2022. Why?

Origin’s been a standout on the ASX so far in 2022, in contrast to previous years.

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Key points

  • Origin Energy shares are roaring in 2022 and are now outpacing the broad market 
  • Analysts point to the commodity boom and in particular surging oil and gas markets as primary drivers for Origin on the charts in 2022 
  • In the last 12 months, the Origin Energy share price has soared over 68% into the green 

Shares of Origin Energy Ltd (ASX: ORG) have tracked higher in the past month of trade and now rest more than 4% in the green in that time.

After a rocky period last year, the Origin Energy share price has taken off in 2022 and risen more than 30% since trading resumed in January.

In wider market moves, the S&P/ASX 200 Energy Index (ASX: XEJ) has also climbed 26% this year to date, meaning Origin has outpaced the broad sector this year.

What’s up with the Origin Energy share price?

Global energy markets have embarked on a huge rally in 2022 amid a wave of macroeconomic and geopolitical crosscurrents.

Brent Crude now trades at US$101 per barrel, a level not seen in a number of weeks according to Trading Economics. It also remains at multi-year highs.

“Brent crude futures tumbled over 3% to around $102-per-barrel, a level not seen in two weeks, dragged down by a stronger dollar and lingering concerns about weakening global demand, particularly from top consumer China due to tightening lockdowns,” it notes.

Despite the pullback, it is still up more than 51% for the last 12 months.

Meanwhile, natural gas also remains propped up amid similar concerns “as traders continued to monitor supply and demand prospects amid high volatility” per the same reports.

It is these factors in particular that are driving the Origin share price in 2022, analysts at investment bank JP Morgan reckon.

The broker said that buoyant LNG and energy markets are helping drive outsized returns relative to the benchmark S&P/ASX 200 Index (ASX: XJO).

“[W]e believe the strong performance from the stock price (Origin is +31% YTD versus the ASX200 at 0%) is largely attributable to increases in LNG prices” it mentioned.

However, investors might need to remain cautious on the divergence of ASX listed energy companies and their underlying markets, the broker added.

This could be a risk heading forward, and helps JP Morgan remain on the sidelines with a neutral stance. It advocates that clients hold for now.

While the Integrated Gas business is improving (driven by higher benchmark oil prices), electricity and gas retail margins remain under pressure. The fact that higher wholesale prices will be largely offset by increased fuel costs in FY2023 also suggests it could be sometime before improvements arise. However, higher LNG prices could surprise to the upside.

JP Morgan joins 7 other brokers covering Origin in its neutral stance, whereas 5 firms reckon that it’s a buy, according to Bloomberg data.

The consensus price target from this list is $6.86, meaning that Origin appears to be fairly priced based on these figures.

Origin Energy share price snapshot

In the last 12 months, the Origin Energy share price has soared over 68% into the green. This year to date, the trend has continued, and it has eclipsed the ASX 200 and even the broad ASX energy index.

Motley Fool contributor Zach Bristow 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 Scott Phillips.

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