The leading ASX energy shares are getting a boost today following a sizeable rise in the oil price overnight thanks to developments in Asia.
Virtually all commodities are subject to the changes in the global economy when it comes to supply and demand.
The oil price has drifted lower since the Russian invasion of Ukraine in 2022, but a quick overnight jump in the energy price may suggest there's hope on the horizon.
This has helped the share prices of Woodside Energy Group Ltd (ASX: WDS), Santos Ltd (ASX: STO), and Beach Energy Ltd (ASX: BPT) rise by around 1%.
Oil price gets a boost
According to reports from various media outlets, including Reuters, the oil price rose more than 1% on Monday because of two factors: the fall of Syrian President Bashar al-Assad and the potential for China to increase demand.
The Brent crude oil price rose 1.4% to US$72.14 per barrel, while the WTI crude oil price rose 1.7% to US$68.37 per barrel.
According to Reuters, state media organisation Xinhua reported that China will increase "unconventional" counter-cyclical adjustments focused on domestic demand and boosting consumption. This is based on a readout of a meeting of leading Chinese officials called the Politburo.
China has been struggling to reignite its economy, including the property market. Real estate prices are down significantly, construction companies face difficulties, and buyer demand is subdued. There are a few different levers China could use to help its economy, including increasing the money supply, lowering interest rates, and implementing financial stimulus.
A group of oil-producing nations called OPEC+ recently decided to delay increasing oil output until April next year, with China's financial slowdown being one factor behind that decision.
According to Reuters, Phil Flynn, senior analyst at Price Futures Group, said:
We see a commodity-price boom if China indeed follows through with the promises of looser monetary policy and the possibility that they will do whatever it takes to stimulate the economy.
There's also the potential that lower US interest rates could help boost economic demand (and oil demand) in the US and the wider global economy, supporting the oil price.
Reuters reported that the overthrow of the Syrian leadership could lead to wider volatility in the Middle East. Jorge Leon, Rystad Energy's head of geopolitical analysis, said:
Events in Syria over the weekend could impact the crude market and increase the geopolitical risk premium on oil prices in the weeks and months to come amid yet more instability in the Middle East region.
ASX energy shares to get a profit boost?
Commodity businesses are very dependent on the commodity price for profit. Their production costs don't change much each year, so a rise in the oil price would help revenue. A lot of that increase can also flow onto the net profit line of the financials, which could help send the share prices of Woodside and Santos higher.
