Brent crude oil continued to fall on Monday with the price of a barrel falling around 0.9% to US$38.32.
Market observers pointed the finger at comments by a Saudi prince that a freeze on oil production volumes would not occur without Iran also restricting supplies.
The oil price has now dropped around 5% in the past week.
Adding to the woes for domestic oil and gas producers is a stubbornly high Australian dollar which has strengthened in recent times, adding further pressure to the local energy sector.
Just before the close of trade on Monday:
- Origin Energy Ltd (ASX: ORG) had slumped 6.3%
- Santos Ltd (ASX: STO) was 4.3% lower
- Beach Energy Ltd (ASX: BPT) was down 3.9%
- Woodside Petroleum Limited (ASX: WPL) had dropped 2.8%
- Oil Search Limited (ASX: OSH) had slipped 2.6%
In contrast, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) was trading flat.
What now?
With the exception of shareholders in Beach who are still sitting on 25% gains for calendar year 2016, investors in the four other major producers listed above will be shaking their heads in dismay.
The rebound which occurred during February and March would appear to have run out of steam and what happens next is anyone's guess…
With short covering reportedly being a major driver of the recent rally, the oil price and oil and gas stocks could have been set-up to re-test their recent lows.
Countering this is the supply side contraction in US drilling rigs and possible action from OPEC member countries which could be viewed as a positive leading indicator for the oil price.
