S&P/ASX 200 Index (ASX: XJO) energy shares were broadly strong performers in the financial year gone by.
Despite a steep fall in coal, gas, and oil prices from the mid to late 2022 calendar year highs, the big ASX energy stocks helped drive the S&P/ASX 200 Energy Index (ASX: XEJ) to a 12% gain in the 2023 financial year (FY 2023).
That compares to a 10% gain posted by the ASX 200.
As we reach the end of the second week of trading in FY 2024, the energy sector is again outperforming. The ASX 200 Energy Index has gained 4.03% since the closing bell on 30 June, compared to a 1.39% gain on the ASX 200.
So, can ASX 200 energy shares continue to outperform in the financial year ahead?
What’s the outlook for oil and gas?
Some of the top ASX 200 energy shares, like Woodside Energy Group Ltd (ASX: WDS), focus on oil and gas exploration and production.
A range of company-specific factors will influence how oil and gas stocks like Woodside, Santos Ltd (ASX: STO) and Beach Energy Ltd (ASX: BPT) perform in FY 2024. But the price of oil and gas will be a big determiner.
On that front, we turn to the latest forecast for gas and oil prices from the United States Energy Information Administration (EIA).
The EIA reported this outlook for Brent crude:
Crude oil prices gradually increase throughout our forecast, reaching about US$80 per barrel in 4Q23 and averaging about US$84 barrel in 2024 because we expect that global oil inventories will decline over the next five quarters.
Brent crude was trading for US$81 per barrel on Friday, presenting these ASX 200 energy shares with a modest potential revenue boost in the year ahead.
As for gas, the EIA reported it expects gas prices in the first half of FY 2024 to be some 17% higher than in the last half of FY 2023:
We expect the Henry Hub spot price will rise in the coming months as declining natural gas production narrows the existing surplus of natural gas inventories compared with the five-year average.
Henry Hub prices in our forecast average more than $2.80 per million British thermal units (MMBtu) in the second half of 2023 (2H23), up from about $2.40/MMBtu in the first half of the year.
So, what about coal?
ASX 200 energy shares digging up black gold
Thermal coal prices hit all-time highs in September before commencing a steep fall in January.
Newcastle coal futures were trading for US$140 per tonne on Friday, down from more than US$435 per tonne in September.
As you’d expect, that’s pressured the big ASX coal stocks.
Year to date, the New Hope Corp Ltd (ASX: NHC) share price has slid 17%, while the Whitehaven Coal Limited (ASX: WHC) share price is down 25%.
With coal prices having returned to levels last seen in June 2021 – seven months before Russia’s invasion of Ukraine – I suspect that they’re near the bottom of what we’ll see in FY 2024, which would be good news for these ASX 200 energy shares.
That assumption is based on the fact that Russian coal exports will most likely remain under international sanctions, limiting global supplies.
I also believe that China’s government will pick up the stimulus pace to lift its sluggish economy. Slow growth out of China has been one of the main factors driving coal prices lower in recent months.
So, while these ASX 200 energy shares may not see the booming share price growth witnessed in the first half of FY 2023, I believe the next six months, at least, will be a lot better than the six months just past.
