What: Investors were already prepared for a selloff in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) on Monday after overseas markets provided a negative lead over the weekend and at lunchtime the index was 1.9% lower!
Many energy and resource companies are faring even worse…
- BHP Billiton Limited (ASX: BHP) is down around 5%
- Santos Ltd (ASX: STO) is down 7%
- Origin Energy Ltd (ASX: ORG) is down 7%
So What: With the price of oil notching up a five-day losing streak to end 10% lower over the course of last week there is obviously continued pressure on the energy sector. That's translated into further falls across the energy sector today, however, there would have been some hope amongst Origin Energy's shareholders after company specific news that looks a positive for the business.
Firstly, according to a report in the Australian Financial Review, Origin has kicked off its previously announced divestment plan to sell a handful of assets including gas pipelines and wind farms to raise around $800 million in cash.
Secondly, Origin's joint venture project Australia Pacific LNG achieved its inaugural shipment on LNG over the weekend, which is a milestone for the $25 billion project having just completed its development stage and entered production.
Now What: With some market pundits suggesting that the price for a barrel of oil could fall into the US$20 range, it is arguably too soon for investors to venture into the energy sector.
Having said that, as the saying goes, 'no one rings a bell at the bottom', so buying when value appears is often a reasonable course of action for long-term investors.
With energy stocks having been heavily sold down over the past year, it would seem likely that the cycle is getting closer to its ultimate low.
