Stocks in the energy sector continue to act as a heavy drag on the Australian share market with all hopes of a "Santa Rally" now appearing to be lost.
The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has fallen nearly 1.4% on Monday to be trading at just 5,148 points after oil prices plunged to fresh five-year lows. The benchmark Brent crude oil fell 2.9% to settle at US$61.85 a barrel, while US crude fell below US$58 which has wreaked havoc on some of our largest energy players.
BHP Billiton Limited (ASX: BHP), for instance, has tumbled another 2.5% to be trading below $28 per unit, while Woodside Petroleum Limited (ASX: WPL) and Origin Energy Ltd (ASX: ORG) have dropped 1.9% and 0.6% respectively. Santos Ltd (ASX: STO) and Sundance Energy Australia Ltd (ASX: SEA) have also lost 2.2% and 8.9% with the pair now down 51% and 69% over the last three months.
Somehow, Senex Energy Ltd (ASX: SXY) has managed to buck the trend, rising 2.8%. It's possible investors are beginning to see that Senex shares may have been oversold after having dropped more than 54% in the last three months alone.
While Senex, and various other energy stocks, could be big winners in the long run, investors need to keep in mind that the shares could certainly have further to fall in the near-term, meaning now might not be the greatest time to buy.
Indeed, more turbulence could be in store for the sector as global supplies continue to massively outweigh demand. In fact, some estimates suggest oil prices could fall to around US$40 a barrel which would indicate a further 30% downside risk.
With the ASX 200 Index now down 9% since early September, investors had been hoping for a rebound in time for Christmas. While that is now looking extremely unlikely, investors should instead be getting excited about the prospect of buying high quality stocks at heavily discounted prices – like the one our top investment advisor has just named his #1 stock pick for 2015!
