Oil prices have taken a big tumble…
The post ASX energy shares on watch after oil prices sink 8% appeared first on The Motley Fool Australia. –
Australian energy shares such as Beach Energy Ltd (ASX: BPT), Oil Search Ltd (ASX: OSH), and Santos Ltd (ASX: STO), and Woodside Petroleum Limited (ASX: WPL) could come under pressure on Tuesday morning.
This follows a sharp decline in oil prices during overnight trade on Wall Street.
While energy shares were out of form on Monday, particularly the Oil Search share price after the exit of its CEO, these declines look likely to be extended during today’s session after oil prices sank as much as 8% overnight.
According to Bloomberg, the WTI crude oil price has sunk 7.6% to US$66.34 a barrel and the Brent crude oil price has tumbled 6.9% to US$68.52 a barrel.
Why are oil prices sinking?
Traders have been selling oil after a surprise announcement out of OPEC on Sunday. That announcement revealed that the oil cartel has agreed to remove all production cuts by September 2022.
According to CNBC, the group of 23 nations have agreed to increase production by 400,000 barrels per day each month from August. This means that by September 2022, the entirety of the almost 6 million barrels per day of oil being withheld will be back on the market.
Some analysts believe the news isn’t as bad as it appears. RBC’s Helima Croft told CNBC: “This was a renewal of OPEC+ vows. We think the market can absolutely absorb the additional 400,000 barrels per month…this is a constructive agreement.”
Goldman Sachs commented: “We view [Sunday’s] deal as supportive to our constructive oil price view with supply increasingly becoming the source of the bullish impulse and evidence of non-OPEC supply shortfalls likely in the coming months.”
In addition to this, the report reveals that the team at Credit Suisse has raised its oil price forecasts for the year. Its analysts are now expecting Brent crude oil to average US$70 per barrel in 2021, up from US$66.50 per barrel previously. It also boosted its WTI crude oil price forecast by US$5 per barrel to an average of US$67 per barrel in 2021.
Citi is even more positive, it said: “The summer season for petroleum markets should be stronger than usual this year on pent-up leisure demand.” It expects Brent and WTI to climb to US$85 per barrel or higher this year.
In light of the above, the recent weakness in energy shares could yet prove to be a buying opportunity for investors.
The post ASX energy shares on watch after oil prices sink 8% appeared first on The Motley Fool Australia.
Wondering where you should invest $1,000 right now?
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.
*Returns as of May 24th 2021
Oil Search (ASX:OSH) share price slides on shock leadership change
ASX 200 midday update: Altium sinks, Oil Search CEO resigns
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.