The Woodside Petroleum Limited (ASX: WPL) share price has been smashed in 2020 but is the ASX energy share cheap enough to buy?
The post Is the Woodside (ASX:WPL) share price cheap enough to buy? appeared first on Motley Fool Australia. –
The Woodside Petroleum Limited (ASX: WPL) share price climbed 1.2% higher yesterday in good news for shareholders. I’m starting watch the ASX energy share and wondering if it’s cheap enough to buy right now.
How has the Woodside share price performed in 2020?
Despite edging higher yesterday, 2020 has been a tough year for Australia’s largest oil and gas producer.
The Woodside share price has slumped 46.7% lower in 2020 as oil prices have been smashed. The coronavirus pandemic has seen demand for energy slump as the manufacturing and travel industries have ground to a halt.
An oil price war between Saudi Arabia-led OPEC+ and Russia also didn’t help. That culminated in oil contract prices briefly going negative in May.
These factors have combined to send the Woodside share price slumping lower in 2020 but is the ASX oil share cheap enough to buy?
Is the ASX oil share a cheap buy or a falling knife?
The outlook for the oil and gas markets are very uncertain in FY21. Much of this relies on the demand side of the equation including how quickly global restrictions ease and key energy-heavy sectors pick back up.
Since bottoming out in the March bear market, the Woodside share price has climbed 20.4% higher but has been trending lower since May.
Overall, investors seem to be pretty pessimistic on the sector. I tend to agree and think there would have to be a further discount to consider buying right now.
I’m not much of a speculator and falling ASX energy shares is about as speculative as it gets. Woodside does have a $17.5 billion market capitalisation and is an out and out large-cap share.
However, there are plenty of challenges facing the industry right now. I’d want to see open borders and a recovering travel industry before buying in.
A stabilising oil price would also be a big factor given how much the Woodside share price relies on the Brent and WTI crude prices.
Foolish takeaway
It’s worth considering buying ASX energy shares at a near-50% discount. However, I think volatile commodity prices and an uncertain macro outlook for FY21 make the Woodside share price too expensive right now.
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More reading
- 5 things to watch on the ASX 200 on Thursday
- 5 things to watch on the ASX 200 on Wednesday
- 5 things to watch on the ASX 200 on Monday
- 5 things to watch on the ASX 200 on Thursday
- Saudi oil price cut to hit ASX shares
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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