The Woodside Petroleum Limited (ASX: WPL) share price rocketed 5.52% higher yesterday, but is the Aussie oil and gas giant in the buy zone?
Why is the Woodside Petroleum share price climbing?
Woodside is Australia's largest operator of oil and gas production. This means when oil prices move, the Woodside share price usually isn't far behind.
The prospect of easing lockdowns around the world boosted oil prices higher on Tuesday. US West Texas Intermediate (WTI) crude futures climbed 1.3% to US$38.69 per barrel while Brent crude futures climbed 1.4% to $41.36 per barrel.
This is largely due to an anticipated increase in demand. When the coronavirus lockdowns kicked off, oil prices plummeted lower. With air travel slowing to a trickle and many businesses shutting their doors, there was limited demand for oil.
That supply-shock was coupled with an oil price war between Saudi Arabia and Russia which led to a glut of production.
However, the Woodside share price rocketed higher yesterday as the tides begin to turn in global markets.
Is Woodside a cheap buy today?
Shares in the Aussie oil and gas producer closed up 5.52% at $24.65 on Tuesday.
However, the Woodside share price is still down steeply from the start of the year.
I think we will see more volatility in ASX energy shares over the coming months. Woodside is trading at a price to earnings (P/E) ratio of 46.7 right now, but what about its relative value?
Santos Ltd (ASX: STO) is probably the closest listed competitor to Woodside.
The Santos share price rocketed 7.30% yesterday and is trading at a P/E ratio of just 13.3 times.
That could mean that Woodside is massively overvalued right now.
Foolish takeaway
I'm not much of an oil and gas investor myself. At a surface level, the Santos share price does look cheaper than the Woodside share price.
However, there are subtle differences that can cause huge valuation changes so it may not be as clear cut as it seems.
