Australian energy stocks have crashed with a bump over the last few trading days as a result of the plunging oil price.
Companies like Liquefied Natural Gas Ltd (ASX: LNG), Senex Energy Ltd (ASX: SXY) and Sundance Energy Australia Ltd (ASX: SEA) have all seen their shares lose nearly 30% since Thursday last week with Brent oil dropping to just US$70 a barrel. Even the market's bigger players, including BHP Billiton Limited (ASX: BHP) and Woodside Petroleum Limited (ASX: WPL) have been smashed with more than $50 billion being wiped from the ASX in the last two trading days.
While all of these companies' profits will no doubt take a hit from the tumbling energy prices, it is perhaps fear of what is to come that could be having the greatest impact on their share prices.
Indeed, OPEC showed last week that it is not yet prepared to restrict production in an already massively oversupplied market. As the world's supply continues to expand, we can only expect the oil price to fall further. In fact, some experts have even forecast Brent oil to fall towards US$55 a barrel, while The Australian Financial Review suggested that oil at US$40 a barrel was a possibility.
Considering the damage that has been caused by a 10% drop in the oil price over the last two days, just imagine the carnage if the oil price were to fall another 42% from its current price…