STO has struggled to participate in any market gains through 2023, a frustrating position for many no doubt as this is a company analysts love. An underappreciation of their capex requirements we think is to blame while the energy sector more broadly tends to be very interest rate/recession correlated i.e. higher rates slows the economy which reduces the demand for oil and gas. We anticipate weaker sales in 2Q23 than current consensus estimates due to softer realised pricing but global oil fundamentals continue to support our view that a material supply deficit of nearly 2Mb/d will emerge over 2H23 pushing oil prices higher.
- We continue to believe the oil price is looking for a low which coincides with bond yields peaking.
MM likes STO into weakness below $7.50
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NB: We hold Woodside Energy (WDS) in our Flagship Growth Portfolio.
