Woodside Energy Group Ltd (ASX: WDS) shares are having a strong finish to the week.
In morning trade, the energy giant's shares are up 3% to $26.81.
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Why are Woodside shares surging on Friday?
Investors have been bidding the company's shares higher this morning after oil prices rose strongly overnight.
According to Bloomberg, the WTI crude oil price is up 5.2% to US$73.78 a barrel and the Brent crude oil price is up 5.1% to US$77.65 a barrel.
It isn't just Woodside shares that are rising today. The whole energy sector is lifting on the news. Here's the state of play at the time of writing:
- Beach Energy Ltd (ASX: BPT) shares are up 3.5% to $1.30.
- Karoon Energy Ltd (ASX: KAR) shares are up 5% to $1.69.
- Santos Ltd (ASX: STO) shares are up 2% to $7.31.
- Strike Energy Ltd (ASX: STX) shares are up 2.5% to 21.5 cents.
This has led to the S&P/ASX 200 Energy index rising 1.6% in morning trade.
Why did the oil price jump?
Crude oil prices charged higher overnight amid fears that Israel could strike Iran's oil industry in retaliation for ballistic missile attacks earlier this week. This marked the third consecutive session of gains for oil.
Though, it is worth noting that not everyone believes that this will have a lasting impact on oil prices.
According to CNBC, Rystad Energy's chief economist, Claudio Galimberti, believes that OPEC+ has plenty of spare crude oil to fill the void if Iranian supplies are hit. He said:
This spare capacity is for now preventing runaway prices amid one of the deepest and most pervasive crises in the Middle East in the past four decades.
Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB, agrees that OPEC+ spare capacity would be sufficient to cover any disruption to Iran's exports.
However, Schieldrop also points out that disruptions in the Strait of Hormuz could pose significant risks. This strait is one of the most important trade routes for oil in the world. Schieldrop notes that disruption here "would add a significant risk premium to oil."
In fact, the chief commodities analyst believes that oil prices could surge to US$200 per barrel if Israel hits Iran's oil infrastructure.
Should you invest?
Analysts at Morgans see a lot of value in Woodside shares at current levels.
The broker recently put an add rating and $33.00 price target on them. And this valuation does not take into account recent events in the Middle East.
