Australian energy stocks fall, as oil futures collapse
As oil market volatility intensifies, we examine the price action from some of Australia’s most important gas and oil companies.
Energy shares dive as oil market volatility spikes
For those watching oil futures markets over the last few days, it should come as little surprise that some of Australia’s largest gas and oil companies faced significant selling pressure when the markets re-opened today.
This looks to have been compounded by broad market weakness, with the share prices of Santos, Woodside Petroleum, Origin Energy, Caltex and Oil Search all finishing out the session lower.
Caltex was the worst performing here, as news broke that acquisition discussions with multinational Alimentation Couche-Tard (ATD) had ended. With a twinge of hope, the company’s management said that:
'ATD has communicated an intention to seek to re-engage once there is sufficient clarity as to the global outlook, although there is no certainty that ATD will ultimately do so.'
Nonetheless, the Caltex share price finished out the session down $1.84, or 7.81%, at $21.72 per share.
Elsewhere, Santos dove 3.73%, Origin Energy crashed 5.42%, Woodside dropped 4.41% and Oil Search fell 2.92%; while the ASX 200 Energy index (AXEJ) finished out the session 312 points, or 4.61% lower at 6,469.50.
Oil futures plunge, OPEC+ deal not enough
This equity market volatility comes as WTI futures plummeted on Monday, with the WTI May Nymex contract hitting an intraday low of US$14.47 a barrel – at around 9PM EDT. This sharp move represents a staggering 20% decline from the close on Friday, where the May contract finished out the session at US$18.27 a barrel.
Though the WTI May futures contract has yet to rollover, the WTI June Nymex futures contract is now disproportionally the more actively traded contract. According to CME Group, the WTI June futures contract volume last stood at ~210k – representing about 5x more volume than the WTI May futures contract.
Ultimately, all of this volatility comes as many doubt the effectiveness of OPEC+’s recently announced production cut agreement.
Though this cut may have signalled the end to Russia and Saudi Arabia’s bitter oil price war, according to Stephen Innes, Chief Global Market Strategist at Axicorp:
‘It hasn't taken long for the market to recognise that the Opec+ deal will not, in its present form, be enough to balance oil markets.’
Such a point is one we made note of in early April, citing ING research, where we wrote:
‘Even if Russian and Saudi Arabia can come to a production cut agreement, ING notes that it would “still likely not be enough to bring the market back to balance”.’
As oil market volatility persists, balance indeed looks to elude the markets.
How to trade energy stocks
What do you make of these recent developments: do they represent bullish or bearish opportunities? Whatever your opinion, you can use CFDs to trade ASX-listed energy stocks – LONG or SHORT through IG’s world-class trading platform now.
For example, to buy (long) or sell (short) Caltex using CFDs, follow these easy steps:
- Create an IG Trading Account or log in to your existing account
- Enter 'CTX’ or 'Caltex’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
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. See full non-independent research disclaimer and quarterly summary.
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