Source: Yahoofinance.com
Oil prices recently gained over 3% on Monday and likely temporary momentum to continue, with WTI crude futures up to $74 per barrel, as rising attacks in the Red Sea led oil companies and tanker owners to steer clear of the region. Iran-backed Houthi militant attacks on commercial vessels in Yemen intensified over the weekend, causing major shipping companies to avoid the Suez Canal. BP Plc and Equinor ASA have halted shipments through the Red Sea for safety and security purposes, while Euronav NV, a shipping company, is also prioritizing safety and temporarily keeping its ships away from the area.
Source: Yahoofinance.com
US natural gas futures also accounted 3% higher to over $2.5/MMBtu, regaining the price momentum from a 6-month low of $2.2, mainly catered due to cyclical demand and increased gas flows to LNG export plants. The markets remain bullish as robust exports and LNG terminals consume 15 billion cubic feet per day. The recent trade glitch also added stimulus to the price upsurge.
Source: Renowned media highlights from the open source.
Inflation’s been a major issue all over, and central banks around the globe are headed to tackle it and bring it back to a comfortable, adjusted range. The economy is at the same time reeling under pressure and fumbling against the backlash of aggressive rate hikes; hence, oil and gas prices have corrected heavily from their 2022 highs.
Now, what’s next in 2024?
Growing concerns over the demand for oil in 2024 and the production boost accompanied by key market participants such as US shale oil operations are contributing to the downward trajectory of oil prices.
It’s scintillating to see from the reiterated game plan by OPEC and allies that whenever there is a risk of a slump in oil prices, supply cuts trigger immediately to tinker the oil sluggishness. The OPEC and its allies recently opted for voluntary production cuts slated for the first quarter of 2024, which are projected to total approximately 2.2 million bpd for the first quarter of 2024.
As per the market report, in the first quarter of 2024, Saudi Arabia fast tracked the voluntary production cut of 1 million bpd, and Russia also followed the same, reducing its crude supply by 300,000 bpd and petroleum products by 200,000 bpd. Additionally, the country also suspended a notable portion of its Urals crude loadings due to a storm. This will have a real impact on oil supply and prices, forcing them to remain steady and hover at a higher range, only inciting further concerns for the economy during this tough time.
As per the report published by the EIA, gas prices at the pump are expected to rise in 2024. In October 2023, the federal agency anticipated that the average for 2024 might rise to $3.60 (USD/MMBtu).
Let’s take a look at some of the ASX companies that are highly involved in oil and gas exploration and production activities.
Woodside Energy Group Ltd. (ASX: WDS) is an Australian oil and gas company involved in hydrocarbon exploration, development, production, and marketing. The ASX stock has a market capitalization of approximately $58 billion and a current market price of $30.97 as of 19 September 2023.
Santos Limited (ASX: STO) is a producer of oil and gas, with a market cap of approximately $24.92 billion and a current market price of $7.67 as an 19 September 2023. STO includes its segments, which are basically the five key assets and operating areas of the Cooper Basin, Queensland and New South Wales, Papua New Guinea (PNG), Northern Australia and Timor-Leste, and Western Australia.
Ampol Ltd (ASX: ALD) is an Australian company having a market cap of $8.44 billion and current market price of $35.435 as of 19 September 2023 is actively engaged in the fuels and infrastructure, as well as convenience retail sectors. The company's core activities encompass the acquisition, refining, distribution, and marketing of petroleum products, alongside the operation of convenience stores. Ampol's primary business segments comprise Convenience Retail, encompassing store offerings and royalties; Fuels and Infrastructure, which covers wholesale fuel supply, international operations, and refining; and Z Energy, responsible for fuel sales in New Zealand.
Frequently Asked Questions (F.A.Q)
What is the oil outlook for 2024?
Goldman Sachs expects the oil prices to range on a higher note between $80 and $100 a barrel if the OPEC+ group remains stubborn in its decision to cut production.
What is a good time to invest in oil?
Everything is based on probability because of uncertainties in the market and multiple variables that trigger oil price fluctuations. However, it is always relevant to make a solid investment in oil stocks for long-term investors. Oil shares most likely offer the potential for both capital appreciation and passive income in the form of dividends as well.
What factors determine the oil price?
Factors that matter most are supply, demand, and sentiment towards oil futures contracts, which are traded heavily by speculators and play a dominant role in price determination.
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