The Santos Ltd (ASX: STO) share price is down 1% today amid wider selling action which sees the S&P/ASX 200 Index (ASX: XJO) down 1.54% at this same time.
Despite today's dip, Santos remains up an impressive 13.8% since the closing bell on 28 September.
With those kinds of gains already banked, has the Santos share price reached its top?
What are ASX energy investors considering?
The Santos share price has received some welcome tailwinds in 2022 from rising oil and gas prices.
While oil prices are down from multi-year highs set earlier this year, Brent is currently trading for US$97.46 per barrel, up from US$88.86 last Monday.
A good part of that lift is due to the latest production cuts announced by the Organization of Petroleum Exporting Countries and its allies (OPEC+) last week. That announcement sent the Santos share price marching higher.
As we reported on Thursday, the cartel agreed to reduce their combined oil production by two million barrels per day (mbpd). The supply cut, the biggest in two years, commences in November.
However, many analysts don't see much further upside to oil prices in the year ahead. A stagnation could also stall the strong performance we've seen from the Santos share price.
Morgan Stanley, for example, forecasts Brent crude oil will be trading for US$100 per barrel in early 2023. While that's significantly above the US$84 per barrel Brent was fetching at the end of September, it's not much above current levels.
According to Morgan Stanley (courtesy of Livewire):
This quota reduction is somewhat at odds with global crude oil inventories that are already low, and mostly still trending lower. OPEC+ also mentioned a need to put a floor under prices in order to support investment levels, which it continues to argue are woefully too low.
CEO of Longview Economics Chris Watling is decidedly bearish on the outlook for oil prices in 2023.
"Despite the size of the cut, the oil price rally has been relatively muted, with WTI [West Texas Intermediate crude] currently trading at around its 50-day moving average," he said in Livewire.
Watling continued:
Arguably the key reason is that, in reality, about half of the announced cut will actually be delivered. Only five OPEC+ members are at their production quota level… Every other OPEC+ member is already producing well below their quota and will not have to implement cuts… As such, based on the allocation of cuts to each member, the maximum cut is likely to be 1.1 mbpd.
Longview Economics also sees "significant supply surpluses" eventuating in 2023. "If our recession view is correct, global oil demand will likely fall faster than supply," Watling said. "Overall, therefore, the outlook for oil prices remains bearish in 2023."
That outlook also suggests the Santos share price may be approaching a medium-term top.
Santos share price longer-term
Taking a longer-term view, the Santos share price has gained 87% over the past five years. That compares to a 15% gain posted by the ASX 200 over the same period.