Shares for Woodside Petroleum Ltd [ASX:WPL] are up 6% since last Friday after a sudden spike in oil prices. Woodside is the largest independent oil and gas company in Australia.
Shares for Woodside are trading at $33.26 today, at time of writing.
Other oil exposed company shares like Beach Energy Ltd [ASX:BPT] and Oil Search Limited [ASX:OSH] also rose on the news.
Why did oil prices jump up?
Over the weekend drones attacked Saudi Arabia’s Abqaiq and Khurais plants, eliminating 5% of the world’s oil supply.
The damage has also disrupted oil production. According to a report from Saudi Aramco, Saudi Arabia could see its production drop by 5.7 million barrels per day, or about half of what the country produces now.
Oil prices jumped on the news.
Brent crude rose by 14% to US$68.90 from US$60.22 on Friday.
The big question now is: How long this attack will affect supply?
To soften the impact on supply, the US has authorised the release of oil from some of its Strategic Petroleum Reserve (SPR).
The US is the world’s top oil producer. As you can see below, last year the US passed Saudi Arabia and Russia:
The US has been rapidly increasing their oil production since 2009, by tapping into shale oil through fracking.
What could happen next?
We have seen record low oil prices due to higher oil supply from the US.
This is happening at the same time that global demand for oil is slowing. Last week OPEC revised their global oil demand growth down to 1.02 million bpd because of slower economic growth.
But in the meantime, risks are rising in the Middle East.
One of the big stories running in the world energy markets has been rising tensions between the US and Iran. We have seen oil tanker attacks in the Persian Gulf and drone strikes against Saudi pumping stations.
Geopolitical tensions could push oil prices higher.
Woodside’s share price is trending higher today following the volatility in oil prices, but the company also has some strong dividends.
To find more dividend stocks check out our ‘Top Five Dividend Stocks for 2019’ report here.