Why are ASX 200 energy shares off to such a great start on Monday?

The big energy stocks are helping send the S&P/ASX 200 Energy Index (ASX: XEJ) higher in early trade.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published April 3, 2023 11:01 am AEST

S&P/ASX 200 Index (ASX: XJO) energy shares are off to a flying start on Monday.

The big energy stocks are helping send the S&P/ASX 200 Energy Index (ASX: XEJ) up 3.29% in early trade, far outpacing the solid 0.85% gains posted by the ASX 200 at this same time.

At the time of writing, the Santos Ltd (ASX: STO) share price, pictured below, is up 3.19%.

Meanwhile, rival ASX 200 energy share Woodside Energy Group Ltd (ASX: WDS) is flying 3.48% higher.

Oil miner holding a laptop looks at his mobile phone. — Image source: Getty Images

What's piquing investor interest?

Investors are bidding up the ASX 200 energy shares after a surprise decision by the Organization of Petroleum Exporting Countries (OPEC+) to slash a million barrels per day from their production levels.

Saudi Arabia, concerned about macro factors depressing global oil prices, will itself provide half those cuts. The nation has pledged to reduce its daily output by a whopping 500,000 barrels per day.

With the market having widely priced in steady production levels from the cartel, oil soared more than 8% on the news.

At the time of writing, Brent crude is trading for US$84.94 per barrel. That's up from US$79.77 on Friday.

While that's clearly welcome news for ASX 200 energy shares, it's not so welcome for political leaders battling inflation on the home front. US President Joe Biden was said to be displeased with the timing of OPEC's decision.

"Today's move, like the October cut, can be read as another clear signal that Saudi Arabia and its OPEC partners will seek to short circuit further macro selloffs. This decision will certainly not be welcomed by the White House," RBC Capital Markets LLC analysts said (quoted by Bloomberg).

"We see this closely held decision as just one more indication that the Saudi leadership is making its oil production decisions with a clear eye to their own economic self-interests," head of commodity strategy at RBC Capital Markets Helima Croft added.

How have these ASX 200 energy shares been tracking?

With a big leap higher this morning, the Woodside share price has regained most of its 2023 losses, currently down 1.25% for the calendar year so far.

ASX 200 energy share Santos, meanwhile, has clawed back into the green for the year, up 1.2%.

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