S&P/ASX 200 Index (ASX: XJO) energy shares have broadly outperformed the benchmark in 2023.
And I believe the next six to nine months will see an even stronger run from Australia's top energy stocks.
While there are numerous company-specific factors that will determine the relative performance of individual stocks, the price of oil and gas is a major determiner across all these ASX 200 energy shares.
Here's what I mean.
At market close yesterday, Brent crude oil was trading for US$90.03 per barrel. That's just about its highest level in 2023, and up 4.6% since 2 January. And the oil price has soared a remarkable 24.6% since the recent lows of US$72.26 per barrel on 27 June.
Sticking with the year-to-date gains, the 4.6% increase in the oil price helped drive a 9.8% increase in the S&P/ASX 200 Energy Index (ASX: XEJ). That's more than double the 4.5% gains posted by the ASX 200 in 2023.
As for the three ASX 200 energy shares I think represent good value today, some have outperformed the energy index while others have lagged.
Here is how the three have performed since the opening bell on 3 January:
- Santos Ltd (ASX: STO) shares are up 12.4%
- Beach Energy Ltd (ASX: BPT) shares are up 2.7%
- Woodside Energy Group Ltd (ASX: WDS) shares are up 9.1%
Atop these share price gains, all three ASX 200 energy shares pay dividends.
Beach Energy shares trade at a trailing yield of 2.5%, fully franked.
Santos shares trade at a trailing yield of 4.5%, unfranked.
And Woodside is a favourite among passive income investors, trading on an inflation-busting, fully franked trailing yield of 8.8%.
So, why do I think these three ASX 200 energy shares are poised for an even stronger run over the six to nine months ahead?
Primarily because oil supplies remain restricted while a surprisingly resilient US economy should help see demand remain strong.
ASX 200 energy shares and the oil price
It was only in July that the US Energy Information Administration (EIA) forecast Brent crude oil would average around US$80 per barrel in the fourth quarter of this year. And the EIA forecast an average oil price for 2024 of US$84 per barrel.
But OPEC+ has decidedly different goals. Ones that could provide ASX 200 energy shares with some ongoing tailwinds.
In an effort to boost global oil prices, Saudi Arabia cut its output by one million barrels per day (bpd) in July. Russia has also been reducing its production, cutting its output by 500,000 bpd in August.
And in good news for ASX 200 energy shares like Santos, Woodside, and Beach, yesterday (overnight Aussie time) both OPEC+ members said they'd extend their production cuts through to the end of 2023.
Commenting on the impact of that decision, ANZ Group Holdings Ltd (ASX: ANZ) analysts said (courtesy of Bloomberg):
Further constraints on oil supply should see oil prices remain well-supported. The market is likely to see sizable drawdowns in inventories as a result of the restrictions on output.
If the latest forecast from National Australia Bank Ltd (ASX: NAB) proves on target, the oil price could rise another 10% over the next six to nine months.
NAB expects Brent crude will fetch an average of US$95.10 per barrel in the March 2024 quarter. The bank's analysts believe Brent will top out at US$99.70 per barrel in the June 2024 quarter.
A sustained 10% boost in the oil price would likely be accompanied by a boost in dividends from these three ASX energy shares, atop some further potential market-beating share price gains.
