The Santos (ASX:STO) share price is leaping 5% higher today. Here's why

The world's hunger for oil continues.

| More on:
happy oil worker in front of oil production equipment

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Santos Ltd (ASX: STO) share price is climbing higher today, up almost 6% in afternoon trading.

Yesterday we had a look into why S&P/ASX 200 Index (ASX: XJO) energy shares like Santos could be well-positioned to outperform this year.

Today, here's a brief follow up.

What's driving the oil price to multi-year highs?

After crashing to lows of US$21.40 per barrel on 24 April 2020 in the wake of pandemic-driven global lockdowns, crude oil is trading at multi-year highs today.

West Texas Intermediate (WTI) crude is at levels not seen since October 2018. International benchmark Brent crude is also at multi-year highs, currently trading at US$70.68 per barrel. That's up 0.6% since I penned yesterday's article and up 8.5% since 20 May.

The rising crude price, and soaring Santos share price, reflects resurgent demand from a reopening world. This has been spurred by dwindling crude stockpiles and a sluggish uptick in new supply from US shale producers.

And, of course, there's OPEC+, which includes Russia.

The organisation, led by Saudi Arabia, delivered large supply cuts during the past year. Only recently has it been moving to carefully open the taps a little wider.

As Bloomberg reports, "OPEC+ ministers agreed Tuesday to press ahead with an increase of 841,000 barrels a day in July, following hikes in May and June…"

OPEC did not comment on its output expectations beyond July.

Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman stoked energy bulls' sentiment by adding that demand for crude "has shown clear signs of improvement".

One factor that's been weighing on oil investors' minds is Iran. Namely, whether the oil-rich nation will work out its nuclear agreement with the United States. That would likely see US sanctions on Iran's oil exports lifted, and could add enough supply to global markets to sink prices.

But as Bloomberg noted, there "was an indication that talks to revive a 2015 nuclear accord with Iran has been delayed for now. An Iranian official said a deal is now expected to be finalised in August."

COVID-19 remains the big wild card for oil prices in the months ahead. If the world can stay ahead of the virus and continue on the path of reopening, crude oil prices and ASX energy shares could continue to enjoy some strong tailwinds.

Santos share price snapshot

With today's intraday gains factored in, the Santos share price is up 32% over the past 12 months, outpacing the 23% gains posted by the ASX 200.

Year-to-date, the Santos share price has continued to outperform, up more than 13% so far in 2021.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Energy Shares

A man slumps crankily over his morning coffee as it pours with rain outside.
Energy Shares

Why are Boss Energy shares crashing 40% today?

This uranium stock is having a tough start to the week.

Read more »

Happy man standing in front of an oil rig.
Energy Shares

What does Macquarie think Karoon Energy shares are worth?

This broker has updated its guidance on this energy company

Read more »

Oil industry worker climbing up metal construction and smiling.
Energy Shares

ASX 200 energy shares lead the market as US trade deals fuel optimism

ASX energy shares lifted 3.94% as more US trade deals led to improved market sentiment.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Energy Shares

$10,000 invested in Paladin Energy shares 5 years ago is now worth…

July 2020 would have been a great time to buy Paladin Energy shares.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

Does Macquarie rate Woodside Energy shares a buy, hold or sell?

Let's see what the broker is saying about the energy giant.

Read more »

Coal miner standing in a coal mine.
Energy Shares

Up 62% since April, what's happening with Whitehaven shares today?

Whitehaven shares have enjoyed a strong rally since April despite weak coal prices.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Energy Shares

Why Macquarie sees Paladin Energy shares as a buy in the dip opportunity

This uranium stock could be a buy according to the broker.

Read more »

Happy man working on his laptop.
Energy Shares

Opportunity knocks: 2 ASX stocks ready to surge

Analysts expect big things from these shares.

Read more »