Why are the Woodside, Santos and Oil Search share prices collapsing?
‘Playing Russian roulette in oil markets may well have grave consequences.’
Why oil prices are collapsing
The last month has not been kind to some of Australia’s most prominent oil stocks, as oil prices collapse and panic spreads through equity markets across the globe.
‘Before the Covid-19 crisis the market was expected to move towards balance in the second half of 2020 due to a combination of the production cuts implemented at the start of the year, stronger demand and a tailing off of non-OPEC supply growth,’ the International Energy Agency (IEA) said as a demand shock had just began to ripple through global oil markets.
Ultimately though, what the IEA couldn’t have predicted was that demand shock being joined by a supply shock too.
Yet as we wrote yesterday:
‘As an attempt to keep prices stable, OPEC – the Organization of the Petroleum Exporting Countries – last week pushed group members and non-members to cut production.’
Russia said no to any such cuts, oil prices fell ~10%; so on Monday Saudi Arabia said they’d flood the market with cheap oil, committing to supply 12.3 million barrels of oil to the market in April and the oil price fell again, this time by as much as 34%, to a low of US$27.34 per barrel.
77% of IG client accounts are currently long US Crude. Where do you stand: are you bullish or bearish? Click here to create an IG Account and start trading today.
Mind you, though oil prices have ‘stabilised’ somewhat in the last few days, with Brent Crude currently trading at US$33.97 per barrel and WTI at US$31.17 per barrel, oil stocks across the globe have seen their share prices effectively ‘reset’ in the last month.
In the last thirty days, Santos (ASX: STO) has seen its share price fall 43%, Woodside Petroleum (ASX: WPL) has crumbled 38% and Oil Search (ASX: OSH) has crashed a spectacular 48%.
Espen Erlingsen, from Rystad Energy ominously said of this unfolding situation:
'Without OPEC+, the global oil market has lost its regulator and now only market mechanism can dictate the balance between supply and demand.'
And although Russia remains confident that it can withstand the potential economic fallout from an oil price war, the IEA’s Fatih Birol cautioned: ‘playing Russian roulette in oil markets may well have grave consequences.’
Practise trading Australian oil stocks with an IG demo account now.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
