When it comes to the Woodside Energy Group Ltd (ASX: WDS) share price, oil prices tend to have a big impact on whether its rises or falls.
In light of this, before buying the energy producer's shares in 2023, it could be worth thinking about where oil prices could be heading.
The good news for investors is that one hedge fund trader believes oil prices could be destined to climb materially in the near future.
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Oil prices tipped to rise
According to Bloomberg, hedge fund trader Pierre Andurand believes that global oil demand could increase as much as 4 million barrels or 4% in 2023 if the world fully emerges from COVID restrictions.
This compares to the International Energy Agency estimate for a 1.7 million increase in demand this year.
Andurand, whose main commodities fund gained about 50% last year, believes that this could lead to oil prices climbing to "upwards of US$140 a barrel once Asia fully reopens, assuming there will be no more lockdowns." Particularly given that jet fuel demand is still down 2.5 million barrels a day from 2019 levels because China has not reopened fully yet.
Overall, the hedge fund trader feels the market is "underestimating the scale of the demand boost" that the COVID reopening would have for oil consumption and ultimately prices.
As a comparison, the WTI crude oil price is currently fetching US$74.47 a barrel and the Brent crude oil price is trading at US$79.42 a barrel. Based on the former, this means that oil prices could rise approximately 90% in 2023.
This would undoubtedly bode well for the Woodside share price if it happened. Especially given that the company was operating with a production cost of US$7.60 per barrel during the first half.
Should you buy Woodside shares?
According to a note out of Citi, its analysts have put a buy rating and $38.50 price target on Woodside shares.
This implies potential upside of 10% for investors over the next 12 months. In addition, the broker is expecting a hefty 9.8% dividend yield in FY 2023, bringing the total potential return to almost 20%.
