RBA Rate Cut? Oil Supply Risks | Woodside Petroleum

17 April 2019

Global markets continued to trend higher overnight, as stocks around the globe rose to six-month highs as positive economic data in China and Germany boosted investor sentiment, though concerns about the impact of US policy on the healthcare sector capped gains on Wall Street.

Financial and tech firms gave Wall Street a modest lift following a string of generally positive earnings, with the S&P 500 US market index inching closer to a new all-time high.

Crude Oil prices are up around +40% year to date, primarily on the back of supply risks. Fighting in Libya and falling Venezuelan and Iranian exports have raised concerns over tightening global supply. In saying that, there are concerns about Russia’s willingness to stick with OPEC-led supply cuts and expectations of higher U.S. inventories. Oil prices gains have been helped by the deal between the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia. The group has been cutting output since Jan. 1 and will decide in June whether to continue the arrangement.

Stock in Focus: Woodside Petroleum (WPL:ASX)

Shares in oil & gas producer Woodside Petroleum (WPL) jumped after recently delivering a solid result for the 2019 full year, and in turn it rewarded its shareholders with a US$1.44 per share dividend – a +47% jump from the previous year.

2018 was another impressive year for WPL, as it lifted revenue by +32% from last year due to a higher realised price for its oil and LNG, as well as an +8% increase in production due to the completion of major projects. Accordingly, net profit after tax increased by +28% from last year to $1,364m, due to higher revenue and lower cost of production. However, stronger margins were offset by a larger interest and deprecation charge due to the commencement of a number of major projects. 

WPL remains our preferred energy sector pick, with most of its exposure in LNG which is expected to see increased demand that will create a supply shortfall in 2020. WPL offers a healthy dividend yield and growth is being driven by increased production and as energy prices are holding at relatively favourable levels.

We currently have a BUY recommendation on Woodside


Australia & New Zealand Market Movers

The Australian share market made gains yesterday (ASX 200 index +0.42%) as the Australian dollar fell after the latest Reserve Bank minutes revealed board members think an interest rate cut could be "appropriate" if unemployment rises and inflation remains weak.

In stock news, rare earths producer Lynas said it achieved record production and better-than-expected financial results in the March quarter despite starting from scratch because of a shutdown of the plant in December. The record production helped mitigate the impact of weaker rare earths prices. Blackmores fell following a slide in its profits and revenues during the first quarter. Net profit after tax plunged 43 per cent in the three months ended March 31 to $9.9 million, and revenue dropped 4.3 per cent to $141 million.


The New Zealand market was higher once again on Tuesday (NZX 50 index +0.63%) as exporters including Kathmandu Holdings and A2 Milk helped drive the market higher amid growing optimism over US-China trade talks. The New Zealand dollar was a little weaker against the greenback but stronger against the Australian dollar on signs it won't take much for the central bank there to cut interest rates. Outside the benchmark index, Eroad shares rose after reporting faster US sales growth in the March quarter.

3 Things Markets Will be Watching this Week

  1. ​The​ US first-quarter reporting season​ gets into full swing this week​.
  2. Minutes from the last RBA meeting are released on Tuesday.
  3. ​Aussie employment figures are published Thursday, while NZ inflation data is released on Wednesday.


Have a Great Day,


Crude Oil prices are up around +40% year to date, primarily on the back of supply risks.

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