ASX energy shares on watch after oil prices sink 8%

Oil prices have taken a big tumble…

| More on:
ASX energy shares falling prices of oil demonstrated by a red arrow

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

What happened?

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.

Bullish analysts

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.

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.

More on Energy Shares

An oil worker in front of a pumpjack using a tablet.
Energy Shares

Up 41% since April, are Woodside shares a good buy today?

A leading expert delivers his verdict on Woodside shares and dividends.

Read more »

Happy man in high vis vest and hard hat holds his arms up with fists clenched celebrating the rising Fortescue share price
Energy Shares

Forget Boss Energy shares! This ASX uranium stock could be a sleeping giant

Globally significant potential.

Read more »

A man in a suit face palms at the downturn happening with shares today.
Energy Shares

Why is this ASX 300 stock crashing 17%?

Why are investors hitting the sell button? Let's find out.

Read more »

An oil worker in front of a pumpjack using a tablet.
Energy Shares

1 magnificent ASX energy stock down 30% to buy and hold for decades

Let's see why this energy stock could be worth considering.

Read more »

An oil miner with his thumbs up.
Energy Shares

Why Beach Energy shares just came roaring back

Beach Energy shares are smashing the benchmark on Monday. But why?

Read more »

an oil refinery worker checks her laptop computer in front of a backdrop of oil refinery infrastructure. The woman has a serious look on her face.
Energy Shares

Earnings season begins! 6 ASX 200 energy stocks report on these dates

Let's find out when.

Read more »

A graphic depicting a businessman in a business suit standing with his hand to his chin looking at a large red arrow pointing upwards above a line up of oil barrels againist the backdrop of a world map.
Energy Shares

How Woodside shares smashed the benchmark returns in July

Woodside shares were up an impressive 12.5% over the month

Read more »

Image of a fist holding two yellow lightning bolts against a red backdrop.
Energy Shares

Does Macquarie rate Origin Energy shares a buy, hold or sell?

The broker raised its price target on the stock last month.

Read more »