Santos Ltd (ASX: STO) shares ended the week on a multi-year high at the close of the ASX last Friday. But the oil and gas producer's shares have turned this week, prompting questions about whether sentiment has started shifting.
At the close of the ASX on Tuesday afternoon, the shares are down 0.88% to $7.87 a piece, and they've slumped 5% since reaching a four-year high on Friday.
The stock is now 28% higher for the year-to-date and 22% higher than this time last year.
For context, the S&P/ASX 200 Index (ASX: XJO) also fell into the red on Tuesday, down 0.4% at the close of the index. For the year-to-date the index is down 0.8%.
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What pushed Santos shares to a four-year peak last week?
Rising oil prices have acted as a strong tailwind for Santos shares last week as conflict between the US and Iran continues to inhibit global oil supply and cause oil prices to become incredibly volatile.
Trading Economics data shows that the price of WTI crude oil spiked over US$101 per barrel late last week. While that's lower than the soaring US$110-level seen previously, the increase sparked fears that the oil price was starting to climb higher again.
A few company-specific price drivers, including a rise in production and improved cash flow, have also helped drive Santos shares to its latest peak.
In late-April, 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 confirmed its first oil production from its Pikka phase 1 development on Alaska's North Slope early last week. The ramp-up is expected to continue over the coming weeks.
Why has the share price come off the boil this week?
There is no price sensitive news out of the oil and gas producer to explain the cooling share price on Tuesday.
It's most likely driven by investors taking their gains off the table after a long rally and a cooling oil price. Oil prices plunged by more than 6% on Monday amid rising optimism about a potential US-Iran agreement to end the conflict and reopen the Strait of Hormuz. The price continued heading south on Tuesday.
But it looks like a rebound is imminent…
If analyst forecasts are correct, there is a long way for Santos shares to run over the next 12 months, with a sharp rebound expected soon.
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 11% upside at the time of writing. Although some think Santos shares could rebound another 33% to $10.42 a piece.
