With oil prices surging over 26% from January this year, the big question looming is whether investors have missed the boat on a golden buying opportunity or if there is still time to buy Australian oil companies that are primed for growth, writes Wealth Within chief analyst Dale Gillham.
You will be relieved to learn that there are still some great opportunities in Australian oil companies, and I've got my eye on three ASX-listed oil companies that fit the category.
First up is Woodside Energy Group Ltd (ASX:WDS, LSE:WDS, OTC:WOPEF). Despite the company's share price falling since 2022, rising oil prices benefit Woodside because it can increase profits by selling the oil and gas it produces at higher prices. If the company can also keep production costs steady, the potential higher earnings will inevitably be a positive sign for the share price moving forward. From a technical standpoint, Woodside’s share price seems to have found support at $28, so keep an eye on this as it’s a very good company.
Next up is one of the biggest stocks on our market, BHP (ASX:BHP) Group Ltd (LSE:BHP, ASX:BHP). Like Woodside, it also benefits from higher oil prices because it can increase its revenues from selling its petroleum assets. BHP’s share price has been trading mostly sideways for the past three years, and it recently tested a previous support level at $42. If the share price can start to rise in a sustained move, I expect a re-test of the $50 level over the coming months and a move higher over the longer term.
Last but not least is Viva Energy Ltd. Viva is different from the other two stocks in that it refines oil into products such as gasoline and diesel. Nevertheless, higher oil prices could increase their profit margin, although it could also increase the cost of production. The share price has been rising nicely, increasing over 200% since March 2020. That said, the stock has started to fall recently, and while I’m not concerned about this, I will be watching it very closely.
There is support around $3.40 and if this level holds, which I suspect it will, it will provide the next buying opportunity.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au