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.

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Oil miner holding a laptop and mobile phone looks at his phone and sees the falling oil price and falling Woodside share price

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Key points

  • The Santos and Woodside share prices are racing higher on Monday
  • The ASX 200 energy shares are benefiting from a big boost in the oil price
  • OPEC+ announced a surprise one million barrel per day production cut

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.

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%.

Motley Fool contributor Bernd Struben 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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