It's been a rough start to the week for the resources sector which has thus far acted as a drag on the overall S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), dragging it down by 0.5% early on Monday's session.
After having rallied nearly 10% in recent weeks and having shown signs of stabilising, the price of iron ore has once again dipped below US$70 a tonne, sending a shiver up the spine of investors. Investors have been concerned about the strength of the Chinese economy and whether it is capable of accelerating infrastructure growth, whilst also worrying about the effect that additional supply will have on the commodity's price.
BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) have all fallen in today's session, declining 2%, 1.9% and 2.5% respectively. Mount Gibson Iron Limited (ASX: MGX) and Arrium Ltd (ASX: ARI) have also dropped 3.6% and 3%, respectively.
Oil prices also fell which further added to the pain. Now changing hands for around US$50 a barrel, brent oil, the global benchmark, has lost nearly 55% of its value in the last seven months, causing an enormous level of distress for the energy sector. In what has become a massively oversupplied market, a USA Today article recently quoted a Saudi prince as saying that oil would never reach US$100 again. Meanwhile, others have suggested it could bottom out at US$40 or even US$20, implying there could be plenty more pain to come.
As a result, Liquefied Natural Gas Ltd (ASX: LNG) has retreated a further 1.9% while Sundance Energy Australia Ltd (ASX: SEA), Origin Energy Ltd (ASX: ORG) and Senex Energy Ltd (ASX: SXY) have lost 6%, 1% and 4.8% respectively.
Time to go fishing?
Indeed, companies exposed to either of the commodities have been absolutely hammered in recent months with many stocks having lost more than 50% of their value in that short time. While that might seem like the perfect opportunity to go fishing for some bargains, both commodities are tipped to fall even further over the next 12 months which could result in even greater losses.
While it's definitely worth adding companies like BHP Billiton, Senex Energy and Woodside Petroleum Limited (ASX: WPL) to your watchlist, it would be wise to hold off from buying just yet. In the meantime, there are plenty of other compelling stocks worth buying right now.