Buying S&P/ASX 200 Index (ASX: XJO) energy shares?
Then I don't have to tell you how much the oil price can impact the share prices of companies like Woodside Energy Group Ltd (ASX: WDS), Santos Ltd (ASX: STO) and Beach Energy Ltd (ASX: BPT).
As markets are generally forward-looking, ASX 200 energy shares also tend to rise and fall based on the forecast outlook for global oil prices.
Now, Woodside, Santos, and Beach Energy also produce gas. While the gas price doesn't move in lockstep with the oil price, the two tend to trend in the same direction over the medium term.
With that said, here's the latest forecast from the International Energy Agency (IEA).
What's been happening with the oil price?
As a quick recap, Brent crude oil prices kicked off 2024, trading for US$76 per barrel. The oil price then marched higher through 5 April amid rising conflict in the Middle East, when Brent crude topped US$91 per barrel.
Over the past five weeks, the oil price has retraced, with Brent fetching US$83 per barrel at market close on Thursday.
The net impact has been mixed for ASX 200 energy shares, which have each had their own company specific issues to deal with as well.
Here's how they've been tracking year to date:
- Santos shares are flat
- Woodside shares are down 11.22%
- Beach Energy shares are up 4.91%
What can ASX 200 energy shares expect from global oil demand in 2024?
As for what lies ahead, the IEA has scaled back its 2024 oil demand growth forecast by 140,000 barrels per day since last month's report. The agency now expects global oil demand to increase by an average of 1.1 million barrels per day over the full year.
While that may not be great news for investors in ASX 200 energy shares, it's worth noting that the IEA still forecasts global oil demand will come in at an all-time high of 103.2 million barrels per day in 2024.
On the supply side, the IEA projects global supplies will ramp up by 580,000 barrels per day to 102.7 million barrels per day, also a new record high.
Assuming that the Organization of Petroleum Exporting Countries and their allies (OPEC+) extend its voluntary cuts through to the end of the year, the agency expects OPEC+ production to drop by 840,000 barrels per day in 2024. But that will be more than compensated by an expected 1.4 million barrel per day increase from nations outside the cartel.
One of the wild cards that could see demand higher or lower than forecast remains the path of interest rates, particularly from the US Federal Reserve. Lower rates sooner than forecast, could fuel energy use among households and businesses worldwide.
"Recent macro data from the US has raised expectations that the Fed could start cutting rates soon, which will be providing some support to oil," said Warren Patterson (quoted by Bloomberg).
Looking at what could impact ASX 200 energy shares further down the road, the IEA said, "Our global outlook for 2025 is largely unchanged, with the pace of growth now marginally eclipsing 2024 at 1.2 million barrels per day."
