What’s happening with ASX 200 energy shares this week?

US oil production forecasts have been scaled back, but global demand may fall enough to send energy prices lower.

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Key points

  • ASX 200 energy shares are struggling with slipping oil and gas prices 
  • Oil production forecasts out of the United States have been cut back for 2022 
  • Global energy demand could fall in a recessionary environment 

S&P/ASX 200 Index (ASX: XJO) energy shares took a big tumble in yesterday’s trading after both Brent crude and West Texas Intermediate crude oil prices fell by 1.2%.

Today, two of the three leading ASX 200 energy shares are also in the red.

The Woodside Petroleum Limited (ASX: WPL) share price is doing it the toughest, down 1.7% in afternoon trading.

Meanwhile, Santos Ltd (ASX: STO) shares have slipped 0.5%.

Only Beach Energy Ltd (ASX: BPT) is bucking the trend, with shares up 1.7% to $1.64.

What’s been impacting ASX 200 energy shares?

Many factors come into play to determine an individual company’s share price. But when it comes to the ASX 200 energy shares named above, the price of the oil and gas they pump from the Earth is a core factor.

At the time of writing, one barrel of Brent crude is trading for US$104.34. That’s up 1.8% over the past 24 hours, with WTI posting similar gains. This could help explain the bounce in the Beach Energy share price today.

However, all the ASX 200 energy shares are facing significantly lower prices for their product than just a few days ago. On Friday Brent was still fetching US$112.39 per barrel. A little back of the napkin maths tells us that despite the overnight bump, Brent crude prices are down 7.2% since then.

What’s happening in oil markets?

Commenting on the current fate of oil companies, Warren Patterson, head of ING commodities research said (quoted by Reuters), “China’s COVID situation, rising rates and growing recession risks are not helping risk assets.”

Fawad Razaqzada, a market analyst with City Index and FOREX.com believes we may have seen the top of the energy price spike.

According to Razaqzada (courtesy of Bloomberg), “Crude oil may have finally topped out. I know that is a brave call to make and shorting oil is playing with fire given geopolitical risks.”

There are countless moving parts to analyse when trying to gauge the direction of oil and gas prices, which will either help or hinder the bottom line of ASX 200 energy shares.

One market to keep a close eye on is the United States. The world’s biggest economy isn’t only the world’s biggest consumer of crude oil, it also counts among its top three producers alongside Saudi Arabia and, yes, Russia.

With that in mind, crude prices could fall if the US enters a recession, as some economists fear. If the US economy contracts, the nation’s demand for energy will follow suit.

On the flip side, crude prices could go higher if US production fails to meet demand. On that front, the US Energy and Information Administration (IEA) just scaled back its forecast for US oil production in 2022 to 11.9 million barrels per day (mbpd) from 12.01 mbpd.

Still, even if the IEA’s new forecast is correct, that’s still a sizeable boost from the 11.2 mbpd the US produced in 2021.

After a stellar run so far in 2022, investors in ASX 200 energy shares will be watching these developments closely.

How have these ASX 200 energy shares been tracking?

2022 has been a great year to hold the ASX 200 energy shares discussed above.

Since the opening bell on 4 January, the Santos share price is up 19.8%; the Beach Energy share price is up 25%; and the Woodside share price has gained a whopping 33.5%.

This as the ASX 200 itself has lost 7.2% year-to-date.

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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