Oil prices are climbing hard again, and ASX energy shares are the most direct way to play the move.
The Brent crude price rose 3.4% overnight to US$94.07 per barrel, according to Bloomberg data.
That leaves the global benchmark up more than 31% since the beginning of July.
West Texas Intermediate has followed the same path, adding 3.3% to US$87.12 a barrel.
Renewed fighting in and around Iran, combined with fresh Houthi attacks on tankers in the Red Sea, has put a war risk premium back into the crude market.
Traders are pricing the possibility that a meaningful volume of seaborne supply will not be able to reach the buyers who need it.
For Australian producers, these price rises flow almost straight through to the top line.
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What higher oil prices mean for Santos
Santos Ltd (ASX: STO) is one of the most direct ways to benefit from this trend on the ASX.
The company sells Brent-linked crude alongside LNG that is indexed to oil benchmarks, which means a rising oil price shows up in revenue with only a modest lag.
Shares closed yesterday at $7.85 and were changing hands for $7.94 in early trade on Thursday.
On top of the price rises, there is also volume growth helping to propel top line growth.
The Pikka Phase 1 development in Alaska is producing about 20,000 barrels per day.
Management is targeting a ramp to 80,000 barrels per day during the third quarter of 2026.
Barossa gas is now feeding Darwin LNG, adding a second source of oil-linked revenue, and as such, analysts are broadly positive.
TradingView data shows 12 of the 14 analysts covering the stock rate it a buy or strong buy, with an average price target of $8.48.
Beach Energy offers more leveraged exposure to oil prices
Beach Energy Ltd (ASX: BPT) gives investors more a more leveraged way of benefiting from recent price increases.
The company is a smaller producer, so every extra dollar on the barrel is more important relative to a largely fixed cost base.
The catch is that around half of its sales volumes are east coast Australian gas, which does not track Brent tick for tick.
Bell Potter has retained a hold rating on Beach with a reduced price target of 95 cents, down from $1.15. The broker expects production growth to return in FY27 as capital expenditure eases.
That should enable positive free cash flow to support balance sheet deleveraging, as well as ongoing dividends.
The broker was also positive on Beach's east coast gas exposure and cautious on global oil markets.
A closer look at the latest earnings
Santos released its June quarter update before market open on Thursday.
Sales revenue rose 6% quarter on quarter to $1.35 billion, with Barossa and Pikka both ramping up.
Beach reported quarterly production of 4.9 million barrels of oil equivalent and total revenue of $400 million for the June quarter.
Sales volumes fell 11% against the March quarter, largely reflecting the timing of Cooper Basin oil shipments.
The company also completed the sale of its operated interest in VIC/L35 for $70 million upfront plus a future gas production royalty.
A review of Beach's capital management framework is underway, with an update expected at the full year result.
Foolish takeaway
Oil prices are doing most of the heavy lifting for both businesses right now.
What goes up can also come back down.
As a reminder, Santos fell 8% in a single session when an earlier peace deal broke down in June.
A geopolitical risk premium can evaporate as quickly as it appears.
I think investors buying either name today need to be comfortable owning the commodity cycle, not simply the company.
For those who are comfortable, higher oil prices make the short-term return potential considerably more attractive than at this point one month ago.
