Three leading S&P/ASX 200 Index (ASX: XJO) energy stocks closed sharply higher on Monday.
The ASX 200 ended the day up 0.1%, boosted in part by some outsized gains posted by the energy shares.
Here's how they moved:
- Beach Energy Ltd (ASX: BPT) shares closed up 0.66%
- Woodside Energy Group Ltd (ASX: WDS) shares closed up 1.27%
- Santos Ltd (ASX: STO) shares closed up 1.14%
The ASX 200 energy stocks enjoyed some heady tailwinds from a resurgent oil price.
On Friday, Brent crude oil was trading at a four-month low of US$77.42 per barrel amid investor concerns of weak global demand and record US oil production.
But by Monday, the Brent crude oil price had surged 4.1% to US$80.61 per barrel.
That boost was driven by increasing expectations that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will extend their production cuts when they next meet on 26 November.
"We think Saudi Arabia does have meaningful flexibility to cut further, if needed," JP Morgan strategists said of the upcoming meeting.
"We may see, in addition, Saudi seek to 'share the load' of any potential further cuts among OPEC+ peers, a collective effort, rather than unilateral," they added.
To support the oil price, and by connection ASX 200 energy stocks, OPEC+ has already reduced their combined production by millions of barrels per day, with Saudi Arabia making the biggest cuts.
JP Morgan said it's possible the cartel could announce "deepening the cuts by up to a million barrels" later this month.
Why these ASX energy stocks could keep outperforming into 2024
There's a wide range of company-specific and macroeconomic factors that determine just how well any of the ASX 200 energy stocks perform.
But undoubtedly the oil price is a big one to watch.
While oil prices are likely to remain volatile over the coming months, bullish forecasts by leading analysts see Brent crude gaining as much as 25% from current levels in 2024.
Which would come as good news for Woodside, Beach Energy and Santos shareholders.
According to Daan Struyven, head of oil research at Goldman Sachs (quoted by The Australian Financial Review):
We believe that OPEC will ensure Brent in a US$80-US$100 range by leveraging its pricing power, with a US$80 floor from the OPEC put, and a US$100 ceiling from spare capacity.
Atop expected lower supply from OPEC+, Struyven points to decreased supply growth out of the United States – the world's top producer – as likely to support the oil price and provide tailwinds for ASX 200 energy stocks.
"We expect that gentle inventory declines will raise time-spreads and Brent to a peak of US$95 a barrel by August 2024, with the 2024 average at US$92 a barrel," he said.
