The Woodside Energy Group Ltd (ASX: WDS) share price has dropped around 5% since mid-November. Could this be a good time to buy?
The Woodside share price has had a very good year. It is up 62% in the year to date. In the past six months, it has gone up by more than 10%.
But, with the oil and gas ASX share seemingly having hit a peak in November, could this be the time to jump on the energy business?
Long winter ahead in the northern hemisphere?
I'm not about to make a weather forecast. But, if the Russian invasion of Ukraine continues, this could mean there's no end in sight to the disruption to the global energy market.
Interestingly, the oil price has been steadily declining since June 2022. LNG prices have also been dropping in recent months as well. Analysts may be interested to see how things play out with energy prices over the rest of winter in the northern hemisphere.
In theory, more demand is meant to push up energy prices. But that doesn't seem to have happened in December.
China to reopen?
One of the biggest places for oil demand is normally the Asian superpower, China.
It has been working through COVID lockdowns to keep the spread of infections under control. But, the country now seems to be moving to a COVID normal. Might this be a boost for Woodside shares?
According to many media sources, including CNBC, China is ending the need for inbound travellers to quarantine when they arrive on the mainland. According to the reporting, this led to searches for travel surging to a three-year high.
All of the extra travel could lead to a significant increase in oil demand. A return to normalised mobility within the country by people and vehicles could also boost energy prices.
Time to buy Woodside shares?
I'm not sure that it is the right time to buy. The Woodside share price has been very cyclical in the past, with how variable resource prices can be.
I don't think the oil price is going to go back to under $50, but I'm not sure there can be much more of a positive catalyst aside from Chinese demand.
If I were going to buy Woodside shares, I'd want to do it at a lower price. How much lower? At least under $30. I think this would offer more of a margin of safety and would mean we're not pricing in strong oil prices.
Plus, a lower Woodside share price could mean stronger dividend income. Even at the current price, the FY23 grossed-up dividend yield could be 12.5% according to Commsec.
I like how the business is investing in future energy, such as hydrogen. But, the vast majority of its business is still seemingly going to be related to oil and gas in the medium term, which is how I'm going to judge the business.
