Why is the Santos share price racing higher on Wednesday?

Let's see why investors are buying this energy giant's shares today.

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The Santos Ltd (ASX: STO) share price is having a strong start to the session on Wednesday.

In morning trade, the ASX 200 energy stock is up a decent 3.5% to $7.24.

Why is the Santos share price charging higher?

There are a couple of reasons why the Santos share price is charging higher on Wednesday.

The first is a strong night of trade for oil prices following an escalation of tensions in the Middle East.

According to Bloomberg, the WTI crude oil price was up 3.3% to US$70.41 a barrel and the Brent crude oil price was up 3.25% to US$74.02 a barrel.

This has given the whole energy sector a boost today. So much so, the S&P/ASX 200 Energy index is up 2.3% in early trade.

What else?

Also giving the Santos share price a boost has been the release of an announcement out of the company this morning.

According to the release, Santos has signed a mid-term LNG supply contract with TotalEnergies Gas & Power Asia.

The contract is for the supply of 20 LNG cargoes, or up to approximately 0.5 million tonnes of LNG per annum over a period of three years plus one quarter.

Management notes that the contract will commence in the fourth quarter of 2025 with LNG being supplied from Santos' global portfolio of world-class LNG assets on a delivered ex-ship basis.

The company's CEO, Kevin Gallagher, highlights that the contract with TotalEnergies is a new LNG relationship for Santos and builds on its existing joint venture partnerships.

Commenting on the deal, Gallagher said:

This oil indexed contract, along with the recently executed long-term LNG Sales and Purchase Agreement with Hokkaido Gas in Japan, and the mid-term contract with Glencore, demonstrates Santos' strong LNG portfolio position and customer relationships in the region.

Our portfolio is nicely balanced over the short to medium term with around eighty percent of volumes indexed to oil price and around twenty percent exposed to spot pricing.

There continues to be extremely strong demand in Asia for high heating value LNG from projects such as Barossa and PNG LNG as countries focus on reducing their carbon emissions. Santos is committed to supporting the energy security of our valued customers across Asia, where gas will play an essential role in decarbonisation efforts across the region.

Despite today's gain, the Santos share price remains down 8% over the past 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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