Despite the rash of hydrogen plays sounding off on their sometimes not so “green” fuel, the energy market still revolves around crude oil and is likely to remain so for some time to come.

Little wonder then that with oil prices continuing to trend upwards, Australia’s major energy companies have been putting on some weight.

Despite prices moderating from the peak of $27.40 in late January, shares in Woodside Petroleum (ASX:WPL) are still up 11.7 per cent to $25.41 from its close of $22.74 at the end of 2020.

Santos (ASX:STO), which saw the same peak earlier this year, is also up 17.4 per cent to $7.36 while Papua New Guinea-focused Oil Search (ASX:OSH) climbed nearly 20 per cent to $4.45.

This is reflected in the performance of oil and gas companies over the past six months as seen in the table below.

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Crude oil sentiment

Sentiment about crude oil demand has also increased, helped in part by US President Joe Biden saying recently that Americans could be having barbecues with their families on the country’s Independence Day holiday on 4th July.

But adding to recent concerns raised about Chinese oil demand, oilprice.com has warned that the optimism surrounding the sector may be misplaced.

It noted that while analysts have been bullish about crude oil, even OPEC has cut its demand predictions for the second quarter of 2021 by more than 690,000 barrels per day and that current prices are propped up by the oil cartel’s move to maintain output cuts.

It noted in its report that major OPEC and non-OPEC producers could increase their own crude oil volumes in the coming weeks and months as the oft-forecast $US70 per barrel mark is a very enticing level to increase production.

These include US shale oil producers who are looking to bring more production online soon.

The US Energy Information Administration added that while OPEC’s production restraint would indeed serve to lower global inventories, the resulting rise in prices would also stimulate US crude oil production.

For these and other reasons, there is reason to believe that bearish sentiment could return if supply increases and demand fails to climb.
 

Small cap oil and gas plays

Of the biggest gainers in the past week, Talon Petroleum (ASX:TPD) is up 60 per cent on no news.

The company is participating in the upcoming Walyering-5 well that will test an in-place best estimate prospective resource net to Talon of up to 38.7 billion cubic feet of gas and 0.98 million barrels of condensate.

It has also picked up the Muchea opportunity that is an analogue of Walyering but significantly larger.

Pure Hydrogen (PH2) has completed stimulation work on its Venus-1 coal seam gas well in Queensland’s Surat Basin and will carry out a three-month flow test from the end of March.

This is designed to carry out a controlled drawdown of the well to increase water influx rates, and induce gas breakout that will in turn be followed by increasing gas flow rates.

Results from the flow test will be used to design an extended pilot test, future production wells and inform on water handling requirements.

Invictus Energy (ASX:IVZ) was up on no news though the company noted in its response to an ASX price and volume query that an article in the Zimbabwe Independent newspaper had reported that the company had concluded a production and profit sharing agreement.

The article quoted Mines & Mining Development minister Winston Chitando as saying that the agreement would be signed before the end of the month.

It is progressing the Cabora Bassa project that has the potential to host multi-trillion cubic feet of gas.

Drilling has started at 88 Energy’s (ASX:88E) Merlin-1 well in the NPR-A region of Alaska’s North Slope.

The company is free carried for the first $US10m of the cost of drilling the crude oil well, which targets 645 million barrels of gross mean prospective resource.

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