The Santos Ltd (ASX: STO) share price has tumbled in early morning trade on Thursday. At the time of writing the share price is down 1.3% to $7.63.
But the decline has barely dented gains made this year. For the year-to-date Santos shares have stormed 24% higher and they're up 39% from 12 months ago.
Rising oil prices have acted as a strong tailwind for Santos shares so far in 2026. Conflict in the Middle East has severely restricted global oil supply causing oil prices to become incredibly volatile.
Trading Economics data shows that earlier this month the price of WTI crude oil surpassed the US$115 mark. While it has dropped back to just over US$91 per barrel at the time of writing, it is still nearly double its value earlier in the year.
Ongoing conflict in the Middle East, tighter oil supply and higher prices could continue to act as a tailwind for Santos going forward. But the situation is incredibly unstable and it's not clear how it will progress from here.
In the near term, I think geopolitical uncertainty will push Santos shares from strength to strength, but there are also three other reasons why I think the ASX energy shares are a screaming buy right now.
Image source: Getty Images
1. Santos production is ramping up
In January, Santos announced that its FY25 fourth quarter production was up 15% on the prior quarter which brought full year production to the upper end of guidance at 87.7 million barrels of oil equivalent (mmboe).
Santos is guiding production of 101-111 mmboe for FY26, which represents a significant 25% (or higher) potential uplift year-on-year.
2. Cash flow is improving
As production ramps up, Santos projects are producing steady cash volumes. In January, the Adelaide-based oil and gas company revealed that its quarterly cash flow was around $380 million, up 30% on the prior quarter. This also brought cash flow for the full year to about $1.8 billion.
At the time, the company said it had a cash flow breakeven target of $45-$50 per barrel of oil (far below current values) for the current year, which "will position Santos over the next few years to deliver sustainable results and provide strong returns for our shareholders".
3. Analysts are tipping attractive upside
TradingView data shows analysts are mostly very bullish on Santos shares over the next 12 months.
Out of 14 analysts, 11 have a buy or strong buy rating on the energy shares. The average target price is $8.47, which implies a potential 10.7% upside at the time of writing. But some think the shares could jump another 34% to $10.17 a piece.
