Santos and Woodside share prices rise as oil hits $70 per barrel

We take a look at the broad strokes behind the intensifying US-Iran situation, some of Trump’s recent comments, and the impact it has had on some of Australia’s most prominent oil stocks.

The oil price equation

The ASX 200 index dropped as much as 0.8% during the morning session. It later rebounded, with the blue-chip index currently trading just past the 6700 point mark.

While local equities have evidently struggled, oil prices have continued to rise as tensions between Iran and the US persist.

Brent crude climbed as much as 2.33% – hitting US$70.2 per barrel. WTI was also up, reaching US$64.41 per barrel; today.

These escalating tensions come after a US-ordered airstrike killed the key Iran general Qassem Soleimani. Trump’s team have described Qassem Soleimani as a terrorist.

Prior to Commander Soleimani’s death, brent crude traded at US$68.07 per barrel, on January 3.

Today, Trump made further comments on the developing situation, responding to comments from Secretary of State Mike Pompeo regarding the preservation of Iranian cultural sites.

Speaking to reporters and according to Reuters, Trump said the following:

‘They're allowed to kill our people, they're allowed to torture and maim our people, they're allowed to use roadside bombs and blow up our people and we're not allowed to touch their cultural site? It doesn't work that way.’

Trump is further reported to have said:

‘If they do anything there will be major retaliation.’

Santos and Woodside share prices in focus

Off the back of this bullish price action around oil and growing Iran-US tensions, it’s hardly surprising that some of Australia’s most prominent oil-focused companies saw their share prices rise today.

The Santos (ASX: STO) share price increased 22 cents to reach $8.63 per share (+2.62%); while Woodside Petroleum (ASX: WPL) gained 1.87%, reaching $35.42 per share by mid-afternoon.

Beach Energy (ASX: BPT) – another Australian gas and oil exploration company – also saw its share price increase by as much as 2.12% during today’s session.

In contrast, these extreme geopolitical developments come after some economists were forecasting that oil prices would steadily decline in CY20.

As we reported previously, Westpac economists last month argued that:

'We believe softer global demand and ongoing robust US supply will see crude drift down to US$55/bbl by end 2020.’

‘Despite the new OPEC+ agreement in early December, global crude supply is still forecast to show strong growth in 2020 as the continued OPEC+ production constraint is not enough to fully offset the growth in non-OPEC production.’

Ultimately, the developing Iran situation underscores the inherently unpredictable and complex nature of global markets – and in a much more interesting sense: the inherently unpredictable and complex nature of people.

Finally and unlike some of Australia's publicly-listed oil stocks, Saudi Aramco – the world's largest oil producer – saw its share price decline when it last traded – dropping 1.71% to 34.55 riyals per share.

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