The Australian share market is a sea of red today.
After another horror night for world oil prices, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has dropped more than 1.2% with US crude falling US$2.88 to just US$60.94, while Brent oil fell more than 4% to US$64.07.
Oil prices have been under enormous pressure in recent months. Brent crude oil has now lost more than 40% of its value since June this year. However, it has fallen particularly hard since the recent OPEC meeting, whereby the cartel-like group decided not to curtail production in an already oversupplied market.
On Wednesday, OPEC gave even more reasons for the miners and their investors to be concerned, stating that it expects demand for its crude to fall to around 28.9 million barrels per day in 2015 – down from roughly 29.3 million this year. By comparison, their production target is 30 million barrels per day, highlighting the misbalance between supply and demand.
While this is good news for consumers and airliners (who are rewarded with lower fuel costs), the falling prices have wreaked havoc on oil and gas producers with investors also feeling the pain. As a perfect example, Senex Energy Ltd (ASX: SXY) shares have plunged 68% since the beginning of June, while Santos Ltd (ASX: STO) has more than halved in value since early September.
With some forecasts suggesting oil will drop to just US$40 a barrel, not even the bigger players such as BHP Billiton Limited (ASX: BHP) or Woodside Petroleum Limited (ASX: WPL) have come out unscathed with the pair down 27% and 22% since peaking in August.