Will the oil price drive up the Woodside share price in June?

Is oil about to leap higher?

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Key points

  • Woodside shares outperformed the ASX 200 in May
  • Oil supplies are tipped to tighten, potentially leading to higher oil prices in the second half of 2023
  • Crude oil is currently fetching just over US$71 per barrel 

The Woodside Energy Group Ltd (ASX: WDS) share price climbed slightly in June, but could it go higher?

Woodside shares climbed 1.8% between market close on 28 April and 31 May. For perspective, the S&P/ASX 200 Index (ASX: XJO) shed nearly 3% during the month.

So what's the outlook for the Woodside share price in June?

What's the outlook?

Woodside is a major oil and gas producer on the ASX 200. Rises and falls of the oil and gas price may impact Woodside shares in the future. Production output is also another fact that can weigh heavily on Woodside shares.

Looking at the outlook for energy, commodity strategists at ANZ are tipping the oil market to "significantly tighten" in the second half of 2023.

Senior commodity strategist Daniel Hynes and commodity strategist Soni Kumari highlighted despite "weakening industrial activity" impacting demand for oil, jet fuel demand "is likely to mitigate these losses". They added:

We still believe China's oil demand recovery is on track despite the recent slowdown

On the supply side, OPEC+ continues to play a pivotal role to rebalance the
market. With the latest additional production cuts by Saudi Arabia, we see the market significantly
tightening in the H2 2023.

As for gas, the analysts noted the gas market is on a weaker footing amid high LNG imports and plenty of stocks. However, they added that "lower prices are making gas-fired power generation more profitable than coal, which should help prices to stabilise".

Crude oil is currently fetching US$71.3 per barrel, trading economics data shows.  

The United States Energy Information Administration (EIA) has also lifted its prediction for the oil price, as my Foolish colleague Bernd reported on Wednesday.

EIA is tipping the brent crude oil price to lift by $1 to an average of US$79 a barrel in the second half of this year. Meanwhile, the EIA predicts brent crude oil to average US$84 a barrel in 2024.

Following the OPEC+ announcement on June 4 to extend crude oil production cuts through 2024, we forecast global oil inventories to fall slightly in each of the next five quarters. We expect these draws will put some upward pressure on crude oil prices, notably in late-2023 and early-2024.

Meanwhile, data out of China released today shows China's commodity imports defied expectations in May, according to the ANZ strategists.

Oil imports lifted 51.4 mt while LNG shipments jumped 10 mt on a month on month basis. Commenting on oil imports, Hynes and Kumari said:

Lower prices and a strong flow of Russian shipments kept imports strong. Refined product exports rose strongly by 50% y/y.

Woodside delivered quarterly total production of 46.8 MMboe (520 Mboe per day) in the first quarter of calendar year 2023, 9% lower than the fourth quarter of 2022.

Woodside's guidance for the full-year production in 2023 remains the same.

Santos Ltd (ASX: STO) and Beach Energy Ltd (ASX: BPT) are two other ASX shares that tend to be impacted by the oil and gas price.

Woodside share price snapshot

Woodside shares have climbed nearly 5% in the last year but declined nearly 3% year to date.

Woodside has a market cap of about $65.3 billion based on the latest 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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