Why shares of BHP Billiton Limited could crash today

Shares of BHP Billiton Limited (ASX: BHP) rose on Friday despite its announcement of a US$7.2 billion impairment, but shareholders mightn’t be so lucky today.

The mining giant’s London-listed shares crashed more than 6% on Friday, more than erasing the gains achieved in the previous session. Rio Tinto Limited’s (ASX: RIO) London-listed shares also fell 5.3%.

BHP’s performance in London could be mimicked on the ASX today after oil prices collapsed 6.3%, with Brent crude oil now sitting around US$29 a barrel for the first time in more than a decade.

Source: Google Finance

Source: Google Finance

BHP’s performance so far in 2016 has been nothing short of woeful, disappointing investors around the world who had hoped for a rebound after suffering heavy falls in 2015.

Although its shares might look ‘cheap’ at their current level, investors need to consider all the risks and headwinds facing the mining sector right now. Even at just $15.07 a share, there are risks the shares could fall even lower, especially if iron ore and oil prices do continue to plummet.

As a result, I’m still avoiding buying shares of BHP Billiton.

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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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