If you own Woodside Energy Group Ltd (ASX: WDS) shares you likely keep an eye on the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
The cartel, which is led by Saudi Arabia and includes Russia, was scheduled to hammer out the details of its production cuts over the weekend, on 26 November.
That meeting was pushed back to today (overnight Aussie time) after Angola and Nigeria reportedly balked at instituting ongoing cuts into 2024. The announcement of that delay on 23 November saw Woodside shares close the day down 1.7%.
So, with the OPEC+ meeting announcement expected imminently, should I buy shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas stock now?
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What's at stake for Woodside shares?
As you'd expect, the oil price has a strong influence on the performance of Woodside shares.
On 28 September, for example, Brent crude oil was trading for US$96.55 per barrel. And Woodside stock was trading for $36.69. Today Brent is trading for US$82.82 per barrel. And Woodside shares are fetching $30.88 apiece, down almost 16%.
Which is why the upcoming OPEC+ decision could be so critical.
The cartel began cutting output to support global oil prices towards the end of 2022. Earlier this year, Saudi Arabia upped the ante by voluntarily slashing an additional one million barrels per day off its own output.
With United States crude production at record, world-leading levels, and US crude inventories swelling, a failure by OPEC+ to reach a consensus on extending cuts into 2024 could see oil prices take a steep fall.
On the other hand, should the cartel, which produces roughly 40% of global oil supplies, agree to extend or potentially increase the existing cuts, the oil price could rally sharply, potentially boosting Woodside shares.
Commenting on the OPEC+ meeting yesterday, Rebecca Babin, a senior energy trader at CIBC Private Wealth said (quoted by Bloomberg), "The anxiety brewing in the crude market heading into tomorrow's meeting is palpable."
She said that despite other "fundamental developments" in global oil markets "the shadow cast by the OPEC meeting supersedes all other data".
To buy or not to buy?
So, should I buy Woodside shares before the OPEC+ meeting results are announced?
From a short-term perspective that comes down to whether I think OPEC will indeed extend its cuts.
While there are no guarantees on which way the cartel is going to swing, I believe the wealthier members may have difficulty convincing some of the poorer members to push through additional cuts.
But I believe the Saudis hold enough sway to at least maintain the cartel's current reduced production levels into the first quarter of 2024. That news should see an uptick in crude oil prices, which would offer some tailwinds for Woodside shares.
