One of the biggest trends on the S&P/ASX 200 Index (ASX: XJO) over 2022 thus far has been the oil price and the rise of ASX oil shares. The ASX 200 has had an exceptionally volatile and weak performance over the year to date.
As it stands today, the ASX 200 has recorded a loss of almost 8% over 2022. But in stark contrast, the S&P/ASX 200 Energy Index (ASX: XEJ) has delivered a massive 38% gain over the same period.
We see this trend reflected in the share prices of ASX 200 energy shares too.
Take the Woodside Energy Group Ltd (ASX: WDS) share price. It's up almost 60% over 2022 thus far, helped by its well-received earnings this morning. Santos Ltd (ASX: STO) shares have risen by 21%, while Beach Energy Ltd (ASX: BPT) shares are up 34%.
ASX oil shares have jumped on a rocket in 2022
These gains are almost certainly a byproduct of the stellar run that oil prices have enjoyed over the year. Thanks to a number of factors, including the war in Ukraine, global inflation, higher economic demand and supply chain issues, oil has skyrocketed this year.
According to Bloomberg, West Texas Intermediate (WTI) crude oil was going for around US$76 a barrel at the start of the year. But this rapidly rocketed to more than US$120 a barrel by March as the war in Ukraine began.
As it stands today, oil has cooled off, but is still going for US$96.70 a barrel today. That's worth a 27% rise from where it was at the start of the year.
But now that we are on the cusp of September and spring, what might be next for oil prices?
Well, it is extremely hard to predict what might happen with oil. But we can look at the factors that typically influence oil prices.
What's next for the oil price?
The first is supply and demand. Oil functions in a global market, but nothing impacts the price of oil more than supply and demand. After all, the massive spike we saw in WTI crude back in March was sparked by a supply squeeze as global markets attempted to lock out Russian oil in the wake of the war.
The largest oil-producing countries, such as Saudi Arabia, have a powerful ability to increase or decrease their production of the black liquid. So if one of these countries decides to change its production output, it could have a big impact on the oil price.
But we must also consider economic demand, another massive influencer of the global oil price. Indeed, the falls that we have seen in oil in recent months are put down to the increased risk of a global recession that many commentators are seeing this year.
Oil is a key economic input into almost every form of economic activity. A booming economy means more trucks on the road, more transportation of goods and services and higher use of resources. But the opposite is also true.
If there were to be a global recession, or pullback in economic growth, oil demand would almost certainly fall, resulting in a fall in the oil price.
So there could be a great many numbers of things that could affect the oil price this September. And by extension, the fortunes of ASX oil shares. But, as with most things in the investing world, we shall just have to wait and see what happens.
