Four oil stocks trading higher at noon

Four oil majors found favour with the market morning on the back of higher oil prices following China’s plans to lift the citywide Chengdu lockdowns on Thursday.

The global benchmark Brent crude was up 0.1% to US$94.10 per barrel and the US Nymex lifted 1.3% to US$88.48 per barrel.

Meantime, European natural gas contracts [TTF EU Dutch gas] were also around 10% overnight, and now trade back in line with their March 2022 peaks.

The four oil large caps up at noon today were:

• Woodside (ASX: WDS): up 4.05% to $33.65.

• Karoon Energy (ASX: KAR): up 3.45% to $2.10.

• Santos (ASX: STO): up 3.25% to $7.94.

• Beach Petroleum (ASX: BPT): up 3.15% to $1.70

Citi increases target prices & upgrades Woodside to Buy

Oil prices aside, what’s also attracting investors to oil stocks today is an increase in target prices for Woodside, Santos and Beach Energy by Citi's global commodity team on the back of long-term forecasts for global gas prices, after citing geopolitical instability which shut Nord Stream 1.

Citi’s targets for Woodside, Santos and Beach rise by 10%, 8.4% and 2%, to $36.50, $9.00 and $1.88 respectively.

Citi has also upgraded Woodside to Buy from Neutral, and after mark-to-marking gas prices, the broker estimates Woodside is best-placed to benefit via LNG sales on the spot market. 

Today’s ratings upgrade on Woodside to Buy follows three broker downgrades on the stock on 31 August, these include:

• Ord Minnett: To Accumulate from Buy: Target price $37.00.

• UBS: To Neutral from Buy: Target price $34.00.

• Morgans: To Hold from Add: Target price $34.90.

In addition to valuation issues, these three brokers suspect Woodside’s more conservative balance sheet stance – and management’s capex guidance - may disappoint investors.

Since becoming a top 10 global player, following the merger with BHP’s (ASX: BHP) oil assets, Woodside’s share price has risen from 52-week lows of $21.27 to as high as $35.95.

While brokers can see future upside following a recent pullback, the jury’s out on whether Woodside's share price can hit $40.00 any time soon.

Price forecasts

Citi’s short-term Australian east coast wholesale prices have been trimmed in anticipation of industry and government cooperation in the prioritising of gas supplies for the east coast market.

Meantime, the broker has upgraded its price forecasts of Asian, European and US natural gas amid what the broker notes is a "perfect storm" of extremely tight global natural gas markets.

As a result, Citi has increased its long-term price 11 per cent to $10/GJ.

Citi believes high European natural gas and power prices, courtesy of fuel switching, has had a knock-on effect across the entire energy sector globally.

"Politically, Russia and the West could be in a tit-for-tat spiral that keeps Russian natural gas exports low… weather also does not look to offer much relief to the market,” the broker notes.

Woodside share price over five years.