ASX stocks shine after hasty OPEC trim, crude oil prices spike

The Brent crude oil benchmark has climbed more than 5% to US$84.17 per barrel after everyone’s favourite cartel OPEC and its allies unleashed a surprise output cut of about 1.16 million barrels per day.

It was accompanied by Russia extending its existing half-a-million bpd output cut until the end of 2023, ostensibly in retaliation for price caps placed on its oil production, though there is speculation that it masks a longer-term decline brought about by a combination of ageing fields and a lack of investment and access to technology.

OPEC+ said its cuts were a pre-emptive measure aimed at supporting the stability of the oil market, which translates to an interest in keeping oil prices above the US$80/bbl mark though the Saudi Arabia-led organisation will certainly not complain if prices go up towards the US$90 or even US$100 mark.

However, while our errant wine totting deputy editor at large Christian Edwards believes that the “often disorganised and usually naughty cartel of oil producers” move could result in a $15 per litre increase at the pumps*, a somewhat more realistic assessment would see prices testing an average of $1.90 or even $2 per litre (higher if you’re in Sydney).

*Ed: The emotional equivalent of $15 per litre.

Thankfully, crude price changes take time to filter down to the pumps, so those long easter drives that we are planning are still safe.

What’s he’s not wrong about is that the move has blindside analysts and has angered the US, which had called for increased production to support economic growth.

Oddly enough, the world’s largest oil consumer is also somewhat insulated given that it is also the world’s largest oil producer.

Crude oil production in the US rebounded to an average of 12.46 million barrels per day in January, its highest level since March 2020.

Crude oil production in the United States rebounded in January to an average of 12.462 million barrels per day, according to new data released Friday by the Energy Information Administration.

However, there are strict limits to how far the US can increase its production with shale oil producer Pioneer Natural Resources chief executive officer Scott Sheffield telling CNBC that output could climb up to 13 million barrels per day before growing beyond that at a much slower pace due to a lack of refining capacity.

Crude oil cut impact

Despite this, there is little doubt that the output cuts will roil markets and hoist oil prices, which have taken a dive over the last month towards US$70/bbl on concerns that the banking crisis would impact demand , which isn’t actually that far away from the U$60/bbl cap placed on Russian oil.

We are already seeing some of impact with the rise of crude oil prices (with more likely on the way).

Indeed, Reuters quoted Pickering Energy Partners co-founder Dan Pickering as saying that the output cut could increase oil prices by as much as US$10/bbl.

This is likely to in turn increase inflation, which will do no favours anyone hoping that the Reserve Bank will slow down or halt interest rate rises.

Unsurprisingly, the ASX Energy Index is up 2.22% to 10,687.9 points with a number of companies seeing significant share price increases.

Whitebark Energy (ASX:WBE), a junior oil producer with operations in Canada, led the charge with a 100% gain to 0.2c.

Likewise, ADX Energy (ASX:ADX), which produces oil and gas in Austria, picked up 16.67% to 0.7c.

The ASX’s 800 pound energy gorilla Woodside (ASX:WDS) also put on a credible gain of 2.91% to $34.31 while fellow major Santos (ASX:STO) rose 2.54% to $7.075.

However, Origin Energy (ASX:ORG) actually slipped 0.42% to $8.26, proving that oil price gains don’t always translate into share price growth for oil and gas companies.

Non producers also saw gains with Icon Energy (ASX:ICN) climbing 33.3% to 0.8c while 88 Energy (ASX:88E) rose 27.78% to 1.2c though this might be due in part to its Hickory-1 exploration well in Alaska identifying an additional potential oil and/or gas reservoir after reaching a total depth of 10,650 feet.