S&P/ASX 200 Index (ASX: XJO) energy shares saw some big swings higher and lower in 2023 amid volatile energy prices.
Taking international benchmark Brent crude oil as our example, the oil price kicked off this year trading for US$85.91 per barrel. Brent then tumbled to US$71.84 per barrel in 12 June, before rocketing to US$96.55 per barrel on 27 September.
Today Brent is trading closer to those lows than the highs, at US$76.03 per barrel.
All up, ASX 200 energy stocks have lost ground this year, with the S&P/ASX 200 Energy Index (ASX: XEJ) down 5.4%. That compares to a 4.2% year to date gain posted by the ASX 200.
That's the year almost gone by.
The question investors are asking now is, what's the outlook for ASX 200 energy shares in 2024?
Will ASX 200 energy shares reignite in 2024?
There are a range of companies that could fall into the ASX 200 energy share basket. Those include utility providers and companies involved in oil and gas, coal, uranium, and arguably even lithium production, though the metal doesn't actually produce any energy itself.
For the purposes of this article, we'll focus on the three big Aussie oil and gas stocks, Woodside Energy Group Ltd (ASX: WDS), Santos Ltd (ASX: STO) and Beach Energy Ltd (ASX: BPT).
Here's how they've performed so far in 2023:
- Woodside shares are down 4%
- Santos shares are up 3%
- Beach Energy shares are down 5%
But let's not forget the dividends.
Woodside trades on a fully franked dividend yield of 11.2%. Santos trades on an unfranked yield of 4.9%. And Beach Energy trades on a fully franked yield of 2.7%.
As for the year ahead, there are numerous company-specific factors that will influence the share price performance and dividend payouts from these ASX 200 energy shares in 2024.
Those include whether or not they receive final regulatory approvals to proceed with several multi-billion-dollar energy projects. And in the case of Woodside and Santos, 2024 should reveal whether the two will merge into a single Aussie energy giant or remain rivals.
But one of the biggest factors to watch with these ASX 200 energy shares is the price they receive for the oil and gas they produce.
Will the oil price fly or flounder in 2024?
The International Energy Agency (IEA) is forecasting global oil demand to increase to a record annual high of 102.9 million barrels per day in 2024.
The impact of that record demand on the oil price, and ASX 200 energy shares, may be muted however, as the IEA also notes that, "World oil supply growth is also exceeding expectations."
Still, a number of leading analysts, including Goldman Sachs, see some significant upside potential for the oil price in 2024.
Goldman Sachs is forecasting Brent crude to trade in a range of US$70 to US$100 per barrel next year.
Much of where it may fall in that range will depend on the output cuts from the Organization of Petroleum Exporting Countries and its allies (OPEC+).
The cartel recently agreed to extend and increase existing supply cuts into the first quarter of 2024. But Citigroup says that OPEC+ may need to extend the cuts through all of 2024.
According to Max Layton, Citigroup's global head of commodities research (courtesy of Bloomberg):
These cuts do need to be maintained to balance the market through the course of next year. They can balance this market and keep prices at US$70 to US$80 if they all work together.
But Saudi Arabia may push the cartel to get prices back to the US$100 per barrel range. That's according to analysts at Bloomberg Economics, who say the Saudis may need to achieve those prices to cover their government spending.
Should the oil price head back towards US$100 per barrel in 2024, as it did in late September this year, I'd expect to see the ASX 200 energy shares rally as well.
