The Beach Energy Ltd (ASX: BPT) share price crashed 3.35% lower on the ASX this morning as global oil prices fell on concerns surrounding global economic growth.
What caused oil to fall?
Oil futures fell from their 4-month highs on Friday afternoon as US-China trade war tensions continue to build and Germany looks increasingly likely to teeter into a recession at any moment.
U.S. West Texas Intermediate (WTI) crude fell 1.5% to US$59.04 per barrel on Friday while Brent crude oil futures sell by a similar amount to US$66.75 per barrel.
Manufacturing data out of Germany continues to weaken (as it has every month this year) in a sign that European economic growth could be being stifled by the ongoing global trade tensions. Europe's economic powerhouse is only being kept out of recession by its booming services industry, but any slowdown could see Germany (and potentially Europe) see sharp economic growth declines in the next 6-18 months.
The inversion of the U.S. 10-year Treasury yield below 3-month T-Bills for the first time since 2007 has done little to settle the market nerves over the weekend, as it is seen as a precursor to economic recession.
So is Beach in the Buy basket?
As a leading Australian oil and gas exploration company, Beach has seen its share price surge more than 60% in 2019 alone on the back of lofty east coast gas prices at $9-10 per gigajoule (GJ).
A sustained rebound in global oil prices on the back of supply cuts from OPEC has also helped push Beach to be one of the top S&P/ASX200 Index (ASX: XJO) performers this year.
Beach's share price is currently trading at a record-high $2.06 per share, just shy of its $2.18 mark it reached last Tuesday. I think at this point Beach may be overvalued at least in the short-run, and I'd be waiting to see further earnings growth before jumping on board with the booming energy company.
The gas industry remains at the mercy of government energy policy (or lack thereof) and will surely see some volatility in the months before and after the May Federal Election.
For those looking for something a little edgier than the Energy sector, this top-rated stock in a booming new-age industry in a booming new-age industry could be the perfect portfolio fit.
