2 reasons why the BHP Billiton Limited share price crashed again

Shareholders of BHP Billiton Limited (ASX: BHP) enjoyed some reprieve on Wednesday when their shares rose an impressive 5.6%, but that relief didn’t last long. The shares are back trading at just $16.52, down almost 3% today, and are once again threatening to fall to a new 10-year low.

There are a couple of reasons why BHP’s shares might be falling so heavily today, aside from the obvious fact that the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has also fallen 0.5% with many blue chip shares sitting in the red for the session.

The first reason could be the 0.8% decline in oil prices overnight which has Brent oil now changing hands for US$37.09 a barrel. The Australian Financial Review highlighted that this is within US$1 of its 2004 low, while a number of economists expect it to continue falling.

Unlike oil, the iron ore price rose overnight to US$39.43 a tonne. The problem is, the relief isn’t expected to last long with Goldman Sachs revising its forecasts for the commodity. It expects it to trade for less than US$40 for the next three years and to average just US$35 a tonne in 2017 and 2018.

To top it off, the investment bank cut its price target on the ‘Big Australian’s’ shares by 25% to $18. The Fortescue Metals Group Limited (ASX: FMG) share price also fell 5.2%, while Rio Tinto Limited’s (ASX: RIO) shares dropped 3%.

While some investors are no doubt tempted to buy BHP’s shares at their current price, there could still be further falls to come. Personally, I’ll likely be holding off for a while yet before I hit the “buy” button.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. 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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