The oil price shot up again this week as hostilities between the US and Iran intensified, raising the question of which Australian companies are best-placed to benefit in a high-oil-price environment.
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Oil price trending higher
RBC Capital Markets has this week issued a new research note to its clients, noting that Brent crude rose 23% quarter on quarter to an average of US$96.60 per barrel in the second quarter of 2026.
Looking further out, the broker has actually downgraded its oil price outlook, now expecting Brent to fetch US$80.07 for 2026, down from US$90.99, and US$75.75 per barrel in 2027.
RBC added:
Our steady state (long-term) Brent oil price remains US$80/bbl, reflecting ongoing collateral damage in the Gulf region and a rising call on barrels globally.
For comparison, Brent was trading in a range of about US$55 to US$66 per barrel in the six months before the Iran conflict began in late February.
Australian oil shares in focus
Looking at Australian producers, RBC said its top pick was Woodside Energy Group Ltd (ASX: WDS), "based on its strong longer-term growth profile, and potential to generate more near-term higher priced gas hub sales and LNG trading volumes due to the Middle East conflict''.
They added:
Woodside's 2Q sales revenue is expected to be supported by higher crude and … commodity pricing, despite production volumes being affected by the Pluto LNG project scheduled turnaround. We expect the volatile pricing environment to create opportunity for relatively high gas hub sales and LNG trading volumes quarter on quarter. Woodside's production growth outlook remains highly attractive, with Scarborough (Pluto LNG T-2) on stream by the end of 2026, followed by Trion oil in 2028 and Louisiana LNG in 2029.
RBC has a price target of $34.50 on Woodside shares compared to $29.93 currently.
The broker also expects Santos Ltd (ASX: STO) to outperform, saying the company is poised to deliver meaningful production and free cash flow growth from the second half of 2026, assuming its Pikka and Barossa projects start up well.
They added:
Santos 2Q sales revenue growth is supported by higher production volumes from the ramp up of Pikka (full production target 3Q) and Barossa (delayed) and higher commodity pricing more than offsetting slightly lower production volumes at its Cooper Basin and Western Australia gas assets. We expect GLNG LNG sales volume to decline quarter on quarter, and we continue to see GLNG being most at risk from the Domestic Gas Reservation Scheme. Santos free cash flow (FCF) generation has potential to increase materially from 2H 2026. Santos plans to return at least 60% of its all-in FCF to shareholders from 2027.
RBC has a price target of $8 on Santos shares compared to $7.68 currently.
