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

The Woodside Petroleum Limited (ASX:WPL) share price has tumbled lower today following a sharp drop in oil prices. Should you buy the dip?

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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.

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.

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