What is driving up the Woodside (WPL) and Santos (STO) share prices?
Shares in the 2 oil and gas firms have jumped 9% and 15% in the last month alone.
Oil and gas giants Woodside (ASX: WPL) and Santos (ASX: STO) have become the new market darlings with their stock prices topping the ASX charts repeatedly in the last few weeks.
On Tuesday, both stocks were up more than 3% each in early trading. Smaller player Beach Energy (ASX: BPT) was also up 3.6%.
Why are the Woodside and Santos stock prices hitting highs?
Investors in the 2 Australian producers are the beneficiaries after benchmark crude oil prices rebounded sharply as European nations considered whether to join the US in banning Russian oil over the country's escalating attack on Ukraine.
Brent futures surged more than 7% to $115.62 per barrel, while US West Texas Intermediate (WTI) crude futures settled at $112.12 per barrel, up 7.1%.
European Union governments will consider whether to impose an oil embargo on Russia as they gather with US President Joe Biden for a series of summits this week, adding to the existing series of sanctions.
The jittery oil products market turned more concerned over the weekend, after attacks by Yemen's Houthi group caused a temporary drop in output at a Saudi Aramco refinery at a time when global inventories are already at multi-year lows.
Russia is the world's second biggest energy exporter, supplying around 7 million barrels a day of oil and refined products, or 7% of global supply.
Improving outlook
The bull run in oil prices is likely to be immensely beneficial for oil producers globally, including Woodside and Santos. Macquarie analysts recently estimated earnings for both producers could more than double if oil prices stay above US$100 a barrel for an extended period.
The 2 companies are set to realise better prices and cash in on the global shortfall in LNG supply, as Russia's 30 million tonnes a year of LNG supply is likely to be disrupted over the next few years due to the sanctions.
Australia's domestic situation will add to that uncertainty, with competition watchdog ACCC predicting a gas shortfall over the east coast by 2026 or 2027.
It is forecasting a surplus of just 11 petajoules (PJ), or less than 3% of the forecast demand for the southern states, leaving them reliant on either gas being sent down from Queensland, or having to set up an import terminal.
The tight gas supply and demand fundamentals will allow Woodside and Santos to sell down their assets and develop new growth projects, such as the Scarborough gas project off Western Australia, and the PNG LNG project.
Considering buying Woodside or Santos shares?
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