Energy stocks have lagged the move in oil prices, and the reason comes down to how the market prices future earnings. The Iran conflict and disruption to Persian Gulf supply drove a sharp spike in near-term oil prices—a clear windfall for producers, but longer-dated futures moved less aggressively, even though they did rise.
That matters because companies like Woodside Energy (ASX:WDS) hedge and make investment decisions based on those longer-dated prices, not spot. With breakeven below ~$34/bbl and oil above $US100, margins are strong, but limited hedging around ~$US70 means only partial capture of the price spike.
However, there is also a well-established lag, typically around 13 weeks, between moves in forward prices and the flow-through to earnings and activity. That suggests the sector may now be approaching a catch-up phase relative to the strength already seen in oil prices.
- History suggests that WDS & Co should outperform in the coming months.
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Brent Crude Dec’26 Futures ($S/barrel) v Woodside Energy (WDS)
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Brent Crude Dec’26 Futures ($S/barrel) v Woodside Energy (WDS)
