The S&P/ASX 200 Index (ASX: XJO) fell by 7.3% in September, which was one of the most painful months for ASX shares in the last few years. But, was the Woodside Energy Group Ltd (ASX: WDS) share price able to provide some relief against this sell-off?
It might be reasonable to think that Woodside may be an uncorrelated performer considering it has already beaten the ASX 200 by such a wide margin in 2022 to date – Woodside is up 45% this year while the ASX 200 is down 13%.
But, just because it's up this year doesn't mean it will do well every month.
Woodside share price performance in September
Last month saw Woodside shares drop by approximately 7.5%. This was actually slightly worse than the ASX 200 which dropped by 7.3% over the month.
As one of ASX's largest resource businesses, its short-term performance is highly correlated to the commodities that it produces. As a major oil and gas business, how energy prices perform can be very important for investor sentiment.
The oil price climbed in the first half of 2022 as markets reacted to the knock-on effects of the Russian invasion of Ukraine and how the West decided to try to isolate Russia.
However, since June, the oil price has actually been trending downhill. Woodside can't generate quite as much profit as it could when the oil price was where it was in the middle of the year.
What's next for energy prices?
It's hard to say what energy prices will do next. On the one hand, the northern hemisphere is heading into winter which could mean further volatility (and increases?) for energy sources like coal and gas.
But, there is also a growing wariness about the potential for a global recession. This could mean less demand for oil, which could partly explain why the oil price has been going lower and may also be the reason for the short-term weakness of the Woodside share price.
But, one broker gave out some optimistic thoughts about the business in September. Citi upgraded its rating to a buy on Woodside, with a price target of $36.50. That implies a possible upside of more than 10%.
The reason for the optimism was an increase in expectations for global gas prices. It thinks Woodside can do well through LNG sales to the market.
At the current Woodside share price, Citi thinks it's valued at 7 times FY23's estimated earnings with a projected grossed-up dividend yield of 14.2%.
