The Woodside Energy Group Ltd (ASX: WDS) share price has been a strong performer in 2023, up 7.1%.
That compares to a year to date gain of 4.9% posted by the S&P/ASX 200 Index (ASX: XJO).
Of course, that's not including the interim fully franked dividend of $1.25 per share, which Woodside will pay to eligible shareholders on 28 September. Nor the $2.15 final dividend, which was paid out on 5 April.
If we add those back in, the accumulated value of Woodside shares is up 16.6% this calendar year. Plus some potential tax benefits from those franking credits.
Now, here's why the ASX 200 oil and gas stock could continue to outperform over the months ahead.
More tailwinds ahead for this ASX 200 energy share?
While a number of factors will influence the Woodside share price into 2024, the oil price is one to watch.
Brent crude oil is trading near its 2023 highs, currently fetching US$89.05 per barrel. That's up 3.6% since 2 January, an increase that's offered a welcome boost for ASX oil stocks.
The oil price has largely been pushed higher thanks to major production cuts from OPEC+. Saudi Arabia has pushed through the majority of those cuts, slashing one million barrels per day (bpd) from its output back in July.
Russia has also slashed its output by 500,000 bpd in August with an expected 300,000 bpd reduction through September.
"The three rounds of production cuts by Saudi Arabia and its OPEC+ partners since September 2022 fully explain the return to a large deficit," Goldman Sachs analysts said (quoted by Bloomberg).
What's next for oil and the Woodside share price?
In potentially good news for the Woodside share price, most analysts expect Russian and Saudi Arabian officials will extend the production cuts. An announcement could be out this week.
Commenting on the oil market dynamics, Baden Moore the head of carbon and commodity research at National Australia Bank Ltd (ASX: NAB) said (courtesy of The Australian Financial Review):
You've seen over 5 million barrels a day of supply cut from a 100 million barrels a day market. Supply cuts are quite material. That said, if China faced a more material slowdown the producer cuts won't be enough to hold oil up from here.
Despite the risk of a major slowdown in the middle kingdom, NAB is forecasting Brent crude will trade for an average of US$95.10 per barrel in the March 2024 quarter. NAB then expects Brent to reach US$99.70 per barrel in the June 2024 quarter before expecting a modest easing in global oil prices.
If NAB had this right, that would mean a 12% increase in Brent crude by June 2024. And judging by past movements in the oil price, that could see the Woodside share price gain considerably more.
"We don't think OPEC or the Saudis will give back volume to the market until they see prices sustainably over US$90 a barrel and see US$80 as the floor OPEC's trying to defend," Moore said.
