Another storm might be brewing for energy investors as WTI Crude Oil and Brent Oil futures prices continue their steep declines over the past month.
In fact WTI futures have now fallen from US$72.16 a barrel just one month ago to US$55.38 a barrel today.
The other benchmark oil price in Brent Crude has also fallen from US$81.56 a barrel to US$65.27 a barrel over the same period.
These are significant moves over such a short period and have taken the share prices of some of Australia's leading oil and gas producers lower with them. Let's take a look at some of the scoreboard damage.
- The Woodside Petroleum Limited (ASX: WPL) share price is down around 11% over the past month even though WA's leading oil and gas producer posted a positive quarterly update on October 18.
- The Santos Ltd (ASX: STO) share price is down 14% over the past month as the Gladstone LNG producer tends to be even more volatile than the oil price thanks to its high debt levels making it more vulnerable to an oil price crash.
- The Oil Search Limited (ASX: OSH) share price is down 13% over the past month as this PNG-based LNG producer is also vulnerable to oil price falls as LNG prices are linked to oil prices.
- The BHP Billiton Limited (ASX: BHP) share price is only marginally lower over the past month, as it recently announced plans to sell its US shale assets and dish out the proceeds to shareholders via a buyback and giant special dividend.
- The Senex Energy Ltd (ASX: SXY) share price is down 17% from 47 cents to 39 cents over the past month as the Cooper Basin-based explorer and producer recently announced plans to ramp up exploration and development capex in FY 2019.
Benchmark oil prices trade on a futures basis as companies like Senex need to know what kind of prices they can get for oil in the future before committing vasts amount of capital to exploration or development projects that won't produce any oil until far into the future.
Therefore if oil futures are falling in price it suggests traders and powerful investment banks are more gloomy about the future prospects of the global economy. This is why falling oil prices can also hurt confidence and contribute to falling stock markets.
It's not all bad news though, as some companies like airlines Qantas Airways Limited (ASX: QAN) or Virgin Australia Holdings Ltd (ASX: VAH) actually benefit from oil price falls because jet fuel is one of their main costs.
