Santos Ltd (ASX: STO) shares have climbed to a multi-year high in Wednesday afternoon trade. At the time of writing, the oil and gas producer's shares are up 0.74% to $8.15.
The daily increase doesn't sound like much, but it means the shares are now trading at the highest level seen since early June 2022. At one point this morning, Santos shares were trading as high as $8.19.
The stock is now 33% higher year to date and 28% above its trading price 12 months ago.
For context, the S&P/ASX 200 Index (ASX: XJO) has fallen into the red today, down 1.17% at the time of writing.
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Why are Santos shares storming higher?
Rising oil prices have acted as a strong tailwind for Santos shares over the past three months. War between the US and Iran severely restricted global oil supply and caused oil prices to become incredibly volatile.
Even though the conflict has cooled, the region is still highly volatile, and the movement of oil is still unreliable.
Trading Economics data shows that the price of WTI crude oil is currently sitting at around US$104 per barrel. This is a decline from the US$111 spike we saw in late April, but it still represents a 69% increase from one year ago. It is also around double the trading price seen in late January this year.
Aside from geopolitical uncertainty and a tight oil market, there are also a few company-specific price drivers, including a rise in production and improved cash flow.
Late last month, Santos posted its March quarter update, where it revealed a 1% increase in production and 3% rise in sales revenue versus the prior quarter. Its free cash flow from operations of US$383 million was in line with Q4 2025, and management reaffirmed its full-year 2026 production and cost guidance.
The company also announced a major oil production milestone on Monday this week. It confirmed its first oil production from its Pikka phase 1 development on Alaska's North Slope. The ramp-up is expected to continue over the coming weeks.
Has the buying opportunity passed for investors?
Absolutely not.
If analyst forecasts are anything to go by, we'll see a lot more out of Santos shares over the next 12 months.
TradingView data shows that the majority of analysts are very bullish on the oil and gas company's shares. Out of 14, 11 have a buy or strong buy rating. The remaining three rate the stock as a hold.
The average $8.60 target price implies a potential 6% upside at the time of writing. Although some think Santos shares could fly another 28% to $10.42 a piece.
