ASX oil and gas shares are poised to rally along with the broader S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index this morning as news of a partial US-China trade deal and possible Brexit breakthrough sparked a jump in the US and European markets on Friday.
But it's the Woodside Petroleum Limited (ASX: WPL) share price, Oil Search Limited (ASX: OSH) share price, Santos Ltd (ASX: STO) share price and Beach Energy Ltd (ASX: BPT) that will enjoy a double tailwind.
Not only will the more upbeat outlook for the global economy lift sentiment towards our energy stocks, but news of a missile strike against an Iranian oil tanker will give the sector an extra leg up.
However, the real question is whether the expected share price gains are temporary.
Oil tanker attack sends oil price jumping
The attack on the Iranian oil tanker in itself isn't a big deal to global oil markets. After all, Iran is under sanctions and most countries won't be buying its crude (at least not openly).
But the strike could escalate regional tensions and prompt the Iranian to retaliate against oil infrastructure of its neighbours. Remember the big oil price jump on the back of the recent drone attack on Saudi Arabia?
This is why the Brent crude price jumped over US$60 a barrel on Friday and continues to hold on to gains this morning.
While that could prompt investors to buy ASX energy shares that will benefit from higher crude prices, naysayers think any rally won't last as markets will quickly refocus on the tenuous position of the global economy.
Global recession risks rising
First off, economic activity won't get much of a boost from the latest US-China trade deal as the tentative agreement isn't a real breakthrough but more symbolic in nature.
I am more optimistic about impact from a possible smooth Brexit, but I worry that won't be enough to distract from the possible bad news from this week's annual International Monetary Fund (IMF) meeting in Washington, according to Bloomberg.
The IMF is forecasting 2019 global GDP growth of 3.2%, the weakest since the GFC, and economists believe the organisation will again cut this forecast on Wednesday (our time). This will put the spotlight on the risks of a global recession in 2020.
Meanwhile, the military conflict in Middle East won't change the perception that the oil market is oversupplied.
Oil market is still oversupplied
The International Energy Agency (IEA) put out a dour monthly report that highlighted stockpiles of oil by the OECD countries are near record level of more than 3 billion barrels.
The IEA also cut its demand forecast for 2019 and 2020 due to the slowing global economy, and said a new wave of production was expected to come on stream, outweighing fears about supply security, reported CNN.
Enjoy the share price rally this morning. The party may not last.
