Oil falls as OPEC production jumps: Here's what you need to know

Is it too early to buy energy stocks such as Woodside Petroleum Limited (ASX:WPL) or Santos Ltd (ASX:STO)?

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A strong rally in oil prices may have finally drawn to a conclusion on Friday after the Organisation of Petroleum Exporting Countries, or OPEC, said that output had skyrocketed in March.

While investors were growing more confident that US production may have finally come under control, Saudi Arabia delivered the bad news when it said that it had produced 10.3 million barrels per day in March. That's a 658,000 barrel-per-day increase over the previous month and will contribute to the market's already overgrown pile of supplies.

At the same time, Iraq boosted its production by 556,000 barrels per day and Libya brought an additional 183,000 barrels to the market. In total, OPEC nations produced 31,488 million barrels per day through March, which is well above its production cap of 30 million barrels per day.

The news ended a five-day rally for the resource which had Brent oil trading roughly 16% higher since the beginning of the month.

Trading in Australia's energy sector was mixed as a result of this latest development. While Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH) all recorded slight gains, others weren't so lucky. AWE Limited (ASX: AWE) and BHP Billiton Limited (ASX: BHP), for instance, fell 1.8% and 0.8% respectively, while Liquefied Natural Gas Ltd (ASX: LNG) declined 0.7%.

In reality, no one knows where oil prices are going to be tomorrow, next week, or even next year. As such, investing in the energy sector is a dangerous move, but could prove rewarding should prices rise higher over time.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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