Why this US forecast just lifted my 2024 outlook for the Woodside share price

The Woodside Energy Group Ltd (ASX: WDS) share price is, as you’d expect, highly influenced by global gas and oil prices.

While the oil price and gas price don’t move in lockstep, the two do tend to trend higher and lower together.

Here’s what I mean about the Woodside share price and the oil price.

On 28 September, Brent crude oil was trading for US$96.55. Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas stock closed the day trading for $36.69 apiece.

By 13 December, the Brent crude oil price had fallen to US$74.26 per barrel. Woodside stock dropped more than 18% over that same period to close the day at $30.02 a share.

The oil price has undergone some ups and downs since then, with more ups than downs seeing Brent crude currently trading for US$78.59 per barrel. Alongside that uptick in the oil price, the Woodside share price is up 9% since 13 December.

So, what’s all this about a promising forecast out of the United States?

Why US oil producers could boost the Woodside share price in 2024

The US has always been sitting on a small ocean of oil. But much of it is locked up in oil shale rock fragments.

It wasn’t until revolutionary technology advancements, which made unlocking that oil from the shale economically viable, that US shale production began to boom in 2008.

By 2018 the US had unseated Saudi Arabia and Russia to become the world’s top crude oil producer. And as it produces more crude, the oil price – and by connection the Woodside share price – tends to get pressured.

Which brings us to the latest forecast from the US Energy Information Administration (EIA).

According to the EIA, US crude oil production reached an all-time high in December of more than 13.3 million barrels per day (b/d).

The EIA noted that, “Crude oil production fell to 12.6 million b/d in January because of shut-ins related to cold weather.”

That drop in US production likely helped boost the Brent crude oil price by 7.6% in January. A month that saw the Woodside share price gain 4.4%.

Looking ahead, the EIA said:

We forecast production will return to almost 13.3 million b/d in February but then decrease slightly through the middle of 2024 and will not exceed the December 2023 record until February 2025.

Atop a retrace in US oil output, which would come atop the recently extended production cuts from OPEC+ members, the EIA noted that “ongoing risks of supply disruptions in the Middle East create the potential for crude oil prices” to run hotter than its mid-2024 forecast of around US$85 per barrel.

With this decreased US supply forecast in mind, it’s not only my outlook for the Woodside share price that’s been lifted.

A rising oil price could also usher in boosted Woodside dividends in 2024.

Having paid out $3.40 in fully franked dividends over the past 12 months, Woodside stock trades on a trailing yield of 10.4%.

Looking further ahead, Woodside could face fresh headwinds out of the US in early 2025. The EIA expects the US will notch new record oil production levels in February 2025.

What happened with the Santos merger deal?

In other news that gave the Woodside share price a handy boost on Wednesday, CEO, Meg O’Neill announced that the company had ceased discussions regarding a potential merger with Santos Ltd (ASX: STO).

That merger had been expected to come at a premium for Woodside with Santos shareholders more likely to benefit.

The post Why this US forecast just lifted my 2024 outlook for the Woodside share price appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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