When it comes to the Woodside Energy Group Ltd (ASX: WDS) share price, oil prices tend to have a big impact on whether its rises or falls.
In light of this, before buying the energy producerâs shares in 2023, it could be worth thinking about where oil prices could be heading.
The good news for investors is that one hedge fund trader believes oil prices could be destined to climb materially in the near future.
Oil prices tipped to rise
According to Bloomberg, hedge fund trader Pierre Andurand believes that global oil demand could increase as much as 4 million barrels or 4% in 2023 if the world fully emerges from COVID restrictions.
This compares to the International Energy Agency estimate for a 1.7 million increase in demand this year.
Andurand, whose main commodities fund gained about 50% last year, believes that this could lead to oil prices climbing to âupwards of US$140 a barrel once Asia fully reopens, assuming there will be no more lockdowns.â Particularly given that jet fuel demand is still down 2.5 million barrels a day from 2019 levels because China has not reopened fully yet.
Overall, the hedge fund trader feels the market is âunderestimating the scale of the demand boostâ that the COVID reopening would have for oil consumption and ultimately prices.
As a comparison, the WTI crude oil price is currently fetching US$74.47 a barrel and the Brent crude oil price is trading at US$79.42 a barrel. Based on the former, this means that oil prices could rise approximately 90% in 2023.
This would undoubtedly bode well for the Woodside share price if it happened. Especially given that the company was operating with a production cost of US$7.60 per barrel during the first half.
Should you buy Woodside shares?
According to a note out of Citi, its analysts have put a buy rating and $38.50 price target on Woodside shares.
This implies potential upside of 10% for investors over the next 12 months. In addition, the broker is expecting a hefty 9.8% dividend yield in FY 2023, bringing the total potential return to almost 20%.
The post Looking to buy Woodside shares? Trader says oil price has 90% upside appeared first on The Motley Fool Australia.
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More reading
- How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago?
- Bought $1,000 of Woodside shares 10 years ago? Hereâs how much dividend income youâve received
- 5 things to watch on the ASX 200 on Monday
- How are ASX 200 energy shares tracking in the first week of trade?
- 3 key factors that helped propel the Woodside share price 60% higher in 2022
Motley Fool contributor James Mickleboro 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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