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Why are the Woodside (WPL) and Santos (STO) share prices soaring?


Shares in the oil and gas firms have jumped 5–20% in the last 1 month, continuing their momentum this morning.

Shares in Australia's 2 largest oil and gas companies Woodside (ASX: WPL) and Santos (ASX: STO) are the best performers on the ASX boards on Monday. At the time of writing, the 2 stocks were up 6.2% and 5.3% respectively.

What is pushing up the Woodside and Santos stock prices

The latest jump in Woodside and Santos shares comes after benchmark crude oil prices soared to their highest level since 2008, with Brent crude surging past US$139 a barrel overnight.

Brent prices were still up 9.9% at US$129.78 a barrel, with traders attributing the gains to delays in the potential return of Iranian crude to global markets and reports that the United States and European allies are considering direct sanctions by banning imports of Russian oil over its invasion of Ukraine.

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. Analysts at Bank of America say if most of Russia's oil exports are cut off, there could be a global shortfall of 5 million barrels or more, likely resulting in oil prices doubling to US$200 a barrel.

Meanwhile, Iran will take several months to restore oil flows even if it reaches a nuclear deal with Western countries.

The massive rise in crude oil prices would prompt a rethink of the outlook for economic growth and inflation across the world. However, it would be immensely beneficial for oil producers, including Australia's 2 biggest oil and gas companies.

LNG gains

Macquarie analysts last week estimated that with oil prices at US$100 a barrel and liquefied natural gas (LNG) at US$30 per million British thermal units, Woodside's earnings could jump by 149% while Santos' would rise by 113%. Prices have in fact already risen far beyond that level.

Meanwhile, Woodside and Santos will also cash in on the global shortfall in LNG supply over sanctions by the US, UK and Europe.

Russia supplies 30 million tonnes a year of LNG annually, which makes up about 8% of the world supply. Global energy giants BP, Exxon Mobil, Equinor and Shell have already exited 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, and with planned expansions in Qatar and the US not being enough to meet this demand, investors would be betting Australian producers can claw market share.

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, including the Scarborough gas project off Western Australia and the PNG LNG project.

Considering buying Woodside or Santos shares?

If you are keen to buy shares in Woodside or Santos, you can invest through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.

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