The Santos Ltd (ASX: STO) share price has tumbled again today after yet another drop in oil prices overnight.
According to Bloomberg oil prices fell to their lowest level in two and a half weeks after U.S. gasoline stockpiles increased and crude production rose.
The market had expected gasoline stockpiles to fall by 2 million barrels last week, but data provided by the Energy Information Administration revealed a 1.5 million barrels increase instead.
And while crude inventories declined by 1 million barrels to 532.3 million, crude production rose to its highest level in almost two years.
Despite the best efforts of the Organisation of Petroleum Exporting Countries (OPEC) to curb oil production in order to tackle the supply glut and boost prices, it appears U.S. production has completely offset its cuts.
In fact, according to the report, U.S. production has increased by around 600,000 barrels each day since the OPEC agreement.
Unsurprisingly the shares of AWE Limited (ASX: AWE), Beach Energy Ltd (ASX: BPT), and Woodside Petroleum Limited (ASX: WPL) have also sunk lower today on the news.
Is Santos a buy?
With its shares down 11% year-to-date and not far from their 52-week low, Santos does look reasonably attractive.
But I think oil prices could yet fall lower in the coming months as U.S. production rises and the OPEC agreement comes to an end. This is likely to weigh heavily on its shares, possibly dragging them down even further.
So for now I would suggest investors hang tight and wait for oil prices to bottom before making an investment.
