With the price of WTI standing at US$58.70 a barrel and edging up 1.21% at time of writing, major oil producer Woodside Petroleum Ltd [ASX:WPL] got a comparable bounce of 1.02%, trading at $32.63.
It has been a tough year for the Woodside share price, down 11.72% in a 12-month window with recent supply concerns doing little for the stock:
We assess the current geopolitical situation, sabre rattling by the US and Iran and Woodside’s current operations. We conclude Woodside’s most appealing assets may be its LNG operations given long-term demand dynamics in the APAC region.
Woodside share price has moved with geopolitical developments in the past
The Woodside share price last spiked on 16 September, two days after Saudi oil fields were attacked by what the US believes were Iranian drones.
Prior to this, in mid-July the oil price briefly spiked when a Japanese tanker was attacked in the Gulf of Oman.
Subsequently, the Woodside share price went on a run of seven winning sessions.
The question is, will we see a war between Iran and the US — a seismic event that could spark a strong surge in the price of oil and thus Woodside’s fortunes?
Recently, the US has said it will be sending troops to the region and slapped more sanctions on Iran.
That being said, it would be hard to see the two countries go to war for two main reasons:
- Trump is about to be back on the campaign trail for the 2020 election
- Iran (you would think/hope) is not foolish enough to press its luck
For these reasons, if you are trading Woodside based on the possibility of future conflict, you may wind up disappointed in the medium term.
There are however long-term reasons for why the Woodside share price could be a steal at its current value.
LNG demand in APAC region means WPL’s LNG assets could have long-term value
Have a quick look at the following chart:
Source: Woodside Petroleum Limited
That’s some sizeable growth in demand for LNG, primarily coming from the APAC region.
So, having recently completed their first major ‘turnaround’ at their Pluto LNG project there could be further upside.
This is one of the main appeals of Woodside if you are say, an income investor — not the potential winnings from betting on war.
For Money Morning
PS: Woodside is one of five income plays we look at in this free report. Get the names of the other 4 dividend stocks here.