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The Santos Ltd (ASX: STO) stock price today is not tracking the broader market rally.
In the afternoon of trading, S&P/ASX 200 Index (ASX: XJO) rose 1.24%, while Santos shares fell 1.59% to $7.45 apiece.
But today, it’s not just the stock price of Santos that lags behind the benchmark.
With another famous name energy reserves also in red S&P/ASX 200 Energy Index (ASX: XEJ) was down 1.06%.
What is happening in the oil markets?
Brent, the international benchmark, is currently trading at $91.95 per barrel.
That’s 0.3% more overnight. But it is down 2.8% since Friday.
Analysts are divided about oil prices. And that uncertainty appears to be putting pressure on the share price of Santos and others ASX 200 Oil Stocks today.
These twin forces pit a fairly tight global supply of crude oil against a potential drop in demand if some of the world’s largest economies fall into recession.
Commenting on the oil markets, the head of commodity strategy at ING Group Warren Patterson said (quoted by Bloomberg):
The market is located some suspension at the moment with a negative macro and a tighter supply forecast. At this point, I suspect the market is more concerned about what the impact of the slowdown will be on demand.
In addition to fears that the decline in demand will lead to a drop in oil prices, investors are also watching US President Joe Biden.
Because Biden controls the faucets of the US Strategic Petroleum Reserve (SPR).
The US government previously announced that it would receive 180 million barrels of oil from the SPR. Most of this oil has already been released to the markets.
Investors are now looking at the possibility that the Biden administration, irritated by the latest OPEC+ production cuts, could release another 100 million barrels. This is likely to lead to lower oil prices and further pressure on Santos’ share price.
According to Energy Aspects Founding Partner and Chief Oil Analyst Amrita Sen (quoted by Markets Insider), “They also weigh emergency release potentially up to 100 million barrels [from the SPR]. You just don’t know, given the amount of uncertainty.”
Santos share price snapshot
Despite today’s underperformance, Santos’ share price easily outperformed its benchmark in 2022, gaining 13%. That compares with an 11% year-to-date loss for the ASX 200 index.