The crude oil price has risen by 30% since last Monday, 11 May. The easing of restrictions across large swathes of the world has raised hope of gradual increases in demand. Chinese oil demand, in particular, has risen to pre-pandemic levels. 

Moreover, the Saudi Arabia-Russia crude oil price feud has come to an end. Add to this the positive news related to a potential COVID-19 vaccine and oil and gas investors believe they can breathe freely again.

The damage has been done, however. On Monday, the US Energy Information Administration stated that US shale oil production would drop by record levels in June. Well economics and the continuing ravages of the coronavirus continue to batter the industry. While this is unfortunate for US shale oil producers, it will likely drive further short-term rises in the crude oil price on futures contracts.

Who stands to gain?

The Santos Ltd (ASX: STO) share price has already jumped by 11% this week since Monday. At present, Santos’ price-to-earnings ratio (P/E) is still at 10.26. I believe this is still a reasonable ratio given the company is very well managed. It has a strong LNG hedge and is targeting break-even cash costs of less than the current crude oil price. 

The Origin Energy Ltd (ASX: ORG) share price has had an upward burst of 5% since Monday. Origin recently announced a strategic move to structurally lower operating costs. It also has a $100 million additional cost out program in place and has defensive qualities as Australia’s largest gas retailer. At a P/E of 9.84, this is 6 points below its 10-year average.

As with Origin, the Woodside Petroleum Limited (ASX: WPL) share price has jumped up 6% since Monday. The largest of the 3, Woodside has a current P/E of 39.53 reflecting the company’s forward growth plans. This is lower than the company’s 10-year average P/E. However, it doesn’t matter so much with Woodside. The market clearly sees this company as a growth opportunity.

In truth, Australia owes a debt of gratitude to the Woodside management teams over the past 2 decades in particular. After inventing the LNG industry in Australia, this company is the driving reason why our country has become the world leader in LNG production in January of this year. 

Foolish takeaway

While oil price futures have started to rebound significantly, this is somewhat divorced from the reality of the physical oil market. The world still has a glut of oil. Moreover, the US is still far from pre-pandemic activity.

Since March, trying to forecast market trends is a fool’s errand. Nonetheless, positive sentiment within the market is likely to continue the crude oil price rise at least over the remainder of May, possibly into early June. Even so, of the 3 major energy ASX shares I favour Santos. It benefits directly from a higher oil price; far more than Woodside or Origin. 

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Should you invest $1,000 in Woodside Petroleum shares?
• 5 things to watch on the ASX 200 on Tuesday
• 3 ASX 200 shares to watch this week
• Why Aristocrat Leisure, Newcrest, Santos, & Zip Co shares are charging higher

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 ASX 200 energy shares to buy before crude oil price rises appeared first on Motley Fool Australia.

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Is the Transurban Group (ASX: TCL) share price a buy with traffic returning to the roads around Australia’s capital cities?

Life is starting to return to normal around Australia and one of those elements is that road traffic is starting to return.

The last couple of months have been tough for Transurban. There’s a reason why the Transurban share price fell 38% in around a month. Traffic was expected to fall heavily and it did.

In the week of 26 April 2020 Transurban saw a 44% decline of traffic across its entire network because of the coronavirus. But restrictions are starting to lift and schools are opening up again.

Is the Transurban share price a buy?

Since that low on 19 March 2020 the Transurban share price has actually risen 37.6% so it has recovered more than half of the lost ground.

Will it keep going and get back to its pre-coronavirus level? There’s two big factors to consider.

The first is that interest rates are now incredibly low. That should, theoretically, push asset prices up higher than they would have otherwise been. This should help boost Transurban’s fair value share price. 

But most importantly – what are the traffic numbers going to be over the next 12 months? Will there continue to be a big reduction of traffic with people working at home? Other drivers may want to save a few dollars and avoid toll roads if they’re being cautious with spending.

Or will life somehow miraculously get back to normal before the end of 2020?

Obviously these considerations are very important for the Transurban share price and traffic is key for the Transurban distribution.

Foolish takeaway

At this stage it’s hard to say which way things are going to go for Transurban and its traffic numbers. That’s why I’m happy to leave it on the sidelines for now.

More reading

• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• 3 top ASX dividend shares to buy next week
• 2 high quality ASX dividend shares for patient investors to buy now
• In a post-COVID world, could Australia be the next superpower?
• 3 ASX 200 pandemic winners and 3 losers

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Traffic is returning, is the Transurban share price a buy? appeared first on Motley Fool Australia.

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Despite still trading lower than its 52-week high, the Newcrest Mining Limited (ASX: NCM) share price has been climbing higher in 2020 as investors flock to ASX 200 gold shares. But while investors have been snapping up the Aussie gold miner, is it still in the buy zone?

Why the ASX 200 gold miner’s shares are soaring

While the S&P/ASX 200 Index (ASX: XJO) is down 16.83% this year, Newcrest’s value has surged 5.79%. That means the Aussie gold miner has outperformed the ASX 200 benchmark by an impressive 22.62% in 2020.

The main factor driving the Newcrest Mining share price higher is the global gold price. The value of gold has surged this year amid the COVID-19 pandemic, rising geopolitical tensions and an oil price war.

Investors don’t like uncertainty, and there’s been plenty of that in 2020. This means the gold price has reached multi-year highs above the US$1,750 per ounce mark on the back of strong demand. That’s good news for the Newcrest Mining share price which has climbed to $32.00 per share.

Is the Newcrest Mining share price in the buy zone?

Newcrest is a solid large-cap ASX share at the best of times. It’s worth $25.9 billion at the moment and is well inside the ASX50. However, the perceived safety of gold has supported the gold miner’s share price so far this year.

Having said that, I won’t be buying Newcrest shares. While the Aussie gold miner could continue to outperform this year, I like to invest for the long-term. It’s easy to get distracted by short-term share price movements, but it pays to remember your investment strategy and avoid the day-to-day noise.

Foolish takeaway

There are plenty of investors looking to invest in ASX gold shares right now. While a soaring gold price could support the Newcrest Mining share price in the short-term, buying shares only makes sense as part of a longer-term investment strategy.

More reading

• Are ASX bank shares worth buying despite dividend cuts?
• 5 things to watch on the ASX 200 on Wednesday
• Top brokers pick the latest ASX stocks to buy today
• Here’s why the Fortescue share price hit an all-time high today
• Is the ASX 200 getting too far ahead of itself?

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is the Newcrest Mining share price in the buy zone? appeared first on Motley Fool Australia.

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