How these tailwinds could re-energise ASX 200 energy shares in 2024

ASX 200 energy shares have come under selling pressure since oil and gas prices began to retrace in late September.

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S&P/ASX 200 Index (ASX: XJO) energy shares are losing ground today.

Here's how these top three ASX 200 energy stocks are performing in afternoon trade on Tuesday:

  • Woodside Energy Group Ltd (ASX: WDS) shares are down 0.6%
  • Santos Ltd (ASX: STO) shares are down 0.6%
  • Beach Energy Ltd (ASX: BPT) shares are down 1.5%

For some context, the ASX 200 is down 0.1% at this same time.

ASX 200 energy shares have faced headwinds since oil and gas prices began to retrace at the end of September.

On 27 September, Brent crude oil was trading for US$97 per barrel. By 2 January the price of that same barrel had dropped to US$76.

While the oil price as ticked up from there, currently trading for US$82.69 per barrel, Brent slipped about 0.1% overnight, potentially pressuring the big Aussie oil and gas stocks today.

But there are some potential tailwinds brewing that could yet mean there's a turnaround in their fortunes in 2024.

Tailwinds brewing for ASX 200 energy shares

The first tailwind that could help boost oil prices, and by connection ASX 200 energy shares, is the latest production announcement from the Organization of the Petroleum Exporting Countries and its allies (OPEC+).

This week OPEC+ announced it would extend the existing voluntary agreement to reduce the cartel's combined output by some two million barrels per day. The new agreement runs through the end of June.

As the move was widely expected and priced into markets already, oil price reactions were subdued.

But with global oil demand expected to modestly increase in 2024, the ongoing production cuts could lead to higher oil prices in the second half of 2024 if stockpiles get drawn down.

With the United States economy continuing on its growth trajectory, the US Energy Information Administration (EIA) forecasts that demand in the world's top economy will increase in 2024, to 20.39 million barrels per day, up from 2023's 20.23 million barrels per day.

On a global level, Goldman Sachs is forecasting a demand increase of around 1.5% for 2024.

While that's not a huge increase, with the ongoing OPEC+ production cuts I believe we could see crude oil head back towards US$90 per barrel in the second half of the year, boosting revenues for ASX 200 energy shares.

An additional upside risk for global oil prices, one that no one wishes to see eventuate, is any major escalation in the Red Sea conflict. Should those shipping corridors get shut down, oil prices could easily surpass US$100 per barrel.

As for natural gas, which makes up a large part of the revenues earned by ASX 200 energy shares like Woodside, Santos and Beach, the EIA reported, "We expect the US benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023."

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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