The Woodside Energy Group Ltd (ASX: WDS) share price is up around 2% following the announcement by OPEC.
What’s going on with oil?
In the last few days, it was announced by Saudi Arabia that it would cut its output to 9 million barrels per day in July, from around 10 million barrels per day in May – this is the biggest reduction in years, according to reporting by Reuters.
There was also a deal within the OPEC+ countries – Algeria, Angola, Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates, Venezuela are the OPEC members, with the + referring to Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.
This OPEC+ deal limits supply into 2024. This could help the Woodside share price over the rest of the year.
Following this announcement, the brent oil price jumped 2.4% to around US$78 per barrel. The oil price had been drifting lower following increased concerns about China’s economic recovery following the COVID lockdowns.
Analyst thoughts on the oil situation
Reuters quoted Vivek Dhar, a mining and energy commodities strategist at Commonwealth Bank of Australia (ASX: CBA), who said:
With Saudi Arabia protecting oil prices from sliding too low…we think oil markets are now more prone to a shortfall later this year.
We think Brent futures will rise to $US85/bbl by Q4 2023 even with a tepid demand recovery in China factored in.
What does this mean for the Woodside share price?
Any boost of energy prices is good news for Woodside’s earnings because it makes more revenue and profit for its production.
Woodside has benefited from the stronger prices since the start of last year. I don’t think we’re going to get back to the former heights we saw last year, but what’s supportive for oil prices is supportive for the Woodside share price.
I’m not sure what will represent a good buy price for Woodside will be, with a shift to electric vehicle in the long-term, but seemingly a shortfall for oil in the short-term. I don’t think this is the right time to invest for market-beating returns, but a heavy fall could be beneficial.
