MENU

Energy shares tumble on oil price crash: Should you buy the dip?

It certainly hasn’t been a great day to be an oil producer. Overnight oil prices slumped a whopping 5% following a surprise increase in crude stockpiles in the United States.

According to data provided by the U.S. Energy Information Administration, crude stockpiles increased by 3.3 million barrels.

This was especially surprising considering the market was expecting a 3.5 million drop in stockpiles according to Bloomberg.

Worryingly for OPEC, it appears as though the supply cuts they have undertaken in the hope of boosting oil prices will have had little impact on the global supply glut.

As you might expect, this drop in oil prices has impacted a number of shares on the local share market.

At the time of writing the Woodside Petroleum Limited (ASX: WPL) share price is down almost 3% to $30.67.

Elsewhere the shares of Beach Energy Ltd (ASX: BPT), Cooper Energy Ltd. (ASX: COE), Caltex Australia Limited (ASX: CTX), Origin Energy Ltd (ASX: ORG), Oil Search Limited (ASX: OSH), and Santos Ltd (ASX: STO) have all sunk lower.

What’s next for oil?

I’m quite bearish on oil prices moving forward despite OPEC’s production cuts. With U.S. shale oil production ramping up, I just can’t see the global supply glut reducing significantly any time soon.

So instead of investing in oil and gas producers like Santos, I would suggest investors look at shares which are likely to benefit from lower oil prices.

Fuel costs make up a significant amount of the overall costs of companies like Qantas Airways Limited (ASX: QAN) and Sealink Travel Group Ltd (ASX: SLK). This could make them the big winners from low oil prices.

Alternatively, these growth shares could be even better options for investors today. I expect each of them to smash Santos and its peers over the next few years.

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.