Why is the Woodside (WPL) share price up 3.4% today?
Shares in the oil and gas giant have jumped 23% in the last 1 month alone, continuing its impressive run today.
Shares in Australia's largest oil and gas company Woodside (ASX: WPL) are among the best performers on the ASX boards on Thursday. At the time of writing, the stock was up 3.4% to $31.46 to add to its more than 50% gain in the last 6 months.
Rival Santos (ASX: STO) also rose 3.1% to $7.95.
Why are the Woodside and Santos stock prices higher
The recent surge in Woodside and Santos shares comes as global crude oil prices lift past US$110 a barrel following the escalating Ukraine-Russia conflict, which could boost prospects for the 2 Australia energy producers.
Russia currently supplies 30 million tonnes a year of liquefied natural gas (LNG) annually, which makes up about 8% of world supply. But markets are now worried about this supply being disrupted following severe economic sanctions imposed by Western countries such as the US, UK and Europe over Russia's invasion of Ukraine.
Global energy giants BP, Exxon Mobil, Equinor and Shell have already announced their exit from Russian oil and gas operations, and the country's LNG supply could dwindle in the next few years due to lack of investment, technology and expertise.
Credit Suisse estimates European buyers may have to look for more than 100 million tonnes a year of LNG. With planned expansions in Qatar and the US not being enough to meet this demand, Australian producers could claw market share.
Australia's 2 biggest LNG producers – Woodside and Santos – are expected to cash in from the situation in the short term because of the current spike in prices.
Selldowns, new capacity
With oil at US$100 a barrel and LNG at US$30 per million British thermal units, Macquarie analysts said that Woodside earnings could rise by 149% and Santos by 113%.
The Russia situation could also lift LNG supply and demand fundamentals in a way that allows Woodside and Santos with asset selldowns and development of new growth projects, Credit Suisse said.
For Woodside, prospects could improve for its Scarborough gas project off Western Australia, where it is trying to sell down a large stake and line up LNG customers. Shipments are expected to begin in 2026.
For Santos, the LNG market dynamics could boost its bargaining position as it tries to sell down part of its 42.5% stake in the PNG LNG project run by Exxon Mobil.
Higher LNG contract prices could also spur Woodside and Santos to look at projects that have been on the backburner, such as the Browse and Sunrise projects off northwestern Australia and an expansion of Darwin LNG.
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