Should I buy Santos shares in 2023?

What's ahead for the Santos share price?

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Key points
  • The Santos share price has leapt nearly 4% in the past year 
  • UBS analysts are tipping oil and natural gas prices to go higher 
  • Another broker is tipping a more than 20% upside for the Santos share price 

The Santos Ltd (ASX: STO) share price has climbed slightly in the last year, but could it provide better returns in the future?

Santos shares have risen 3.95% in the last year and are currently fetching $7.37.

In today's trade, Santos shares are up 3.37%. So what is ahead for the Santos share price?

Worker inspecting oil and gas pipeline.

Image source: Getty Images

Could Santos go higher?

Santos is a major oil and gas producer. The price of oil and natural gas is likely to weigh on Santos shares in 2023.

UBS analysts are tipping energy prices to continue to leap higher in 2023. In a report released in January, the UBS chief investment office said it expects oil to "come out on top in 2023".

UBS is predicting oil prices to lift higher than US $100 a barrel in coming months. Analysts forecast brent crude oil to reach US$110 a barrel, while WTI oil is predicted to hit US $107 a barrel. UBS said, "We expect crude oil prices to rise in 2023 for several reasons". These include China's reopening and Russian oil production falling.

With China reopening, oil demand looks set to exceed 2019 levels and hit a record high in 2H23. Emerging Asia, including India, should return to driving oil demand growth in 2023.

Meanwhile, Russian oil production should fall in 2023 due to the European Union's embargo on Russian crude and refined products (to come into force on 5 February).

While production outside the OPEC+ group, which is primarily driven by the US, will likely grow again in 2023, the increase should only be modest following years of underinvestment in building new supply.

Meanwhile, UBS is tipping natural gas to reach US$4.50 per MMBtu by mid-2023 and hit US$5 per MMBtu by late 2023. Natural gas is currently fetching US$3.68, according to Bloomberg. However, in 2022, natural gas rose as high as US$9.7 per MMBtu in August.

What are brokers saying?

Meanwhile, analysts at Morgans are predicting the Santos share price to charge higher in 2023. The broker has placed an add rating on the Santos share price with a $9 price target. This implies an upside of 22%, based on the current share price.

Morgans is optimistic on Santos due to it's "growth profile and diversified earnings base". Analysts said Santos is:

Well placed to outperform against a backdrop of a broader sector recovery.

Santos share price snapshot

The Santos share price has returned gains of 43% over the last five years. In the last week, Santos shares have climbed nearly 7%.

Santos has a market capitalisation of about $24 billion based on the current share price.

Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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