Shares of BHP Billiton Limited (ASX: BHP) have been smashed today after the Organisation of Petroleum Exporting Countries (OPEC) decided not to curtail production, leaving the production ceiling unchanged.
Given that the United States is currently pumping oil at its fastest rate in more than three decades, oil prices around the world have been plunging. With an oversupply of oil in the market there have been calls for OPEC to reduce the production ceiling from its current 30 million barrels per day.
The decision to leave it unchanged however, saw Brent oil fall by US$6.50 to just US$72.55 a barrel while West Texas Intermediate oil dropped below US$70 a barrel. Unfortunately, prices could fall substantially further with some suggesting Brent oil could soon fall as low as US$55 a barrel, according to Fairfax media.
BHP Billiton derives just under a quarter of its earnings from petroleum products. While the Big Australian is already suffering from tumbling iron ore and coal prices, it felt the news particularly hard with its share price crumbling a further $1.33 or 4.2%. At just $30.67, BHP's shares have now dropped 22.8% since mid-August.
Plenty of other oil and gas companies are also feeling the pain today. Senex Energy Ltd (ASX: SXY), Santos Ltd (ASX: STO) and Sundance Energy Australia Ltd (ASX: SEA) have all dropped between 11% and 17%, while Woodside Petroleum Limited (ASX: WPL) and Oil Search Limited (ASX: OSH) have tumbled 6.3% and 7.5% respectively. As a result, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has fallen roughly 70 points.
While a number of oil and gas producers are trading at compelling prices right now, investors might want to play it safe, at least until the volatility facing the industry subsides a little.
