Unfortunately for shareholders of energy companies such as Beach Energy Ltd (ASX: BPT), Santos Ltd (ASX: STO), and Woodside Petroleum Limited (ASX: WPL), these shares look likely to start the week deep in the red after oil prices continued to sink lower.
What happened?
Escalating concerns over an increase in supply and a slowdown in global economic growth have been largely behind the collapse in prices that sent oil prices to their lowest levels in over a year.
According to Bloomberg, the WTI crude oil price closed the week with a 7.7% decline on Friday to US$50.42 a barrel, whereas the Brent crude oil price closed Friday down by 6.1% to US$58.80 a barrel.
This is the seventh consecutive weekly decline and means that WTI crude oil has now fallen over 33% since the start of October and Brent crude oil has fallen 31% over the same period.
Where next for oil prices?
The bad news for the likes of Beach Energy and Santos is that oil prices are well and truly in a bear market now.
In addition to this, according to Reuters, net long positions have now dropped from close to five-year highs to roughly even exposure between longs and shorts. This appears to be a sign that the market is not expecting a rebound any time soon.
However, there is one upcoming event that could help stabilise or even improve prices. On December 6 OPEC will meet in Austria to discuss its future production plans.
At this meeting the oil cartel is widely expected to agree to a meaningful cut to its output in 2019. But whether that will ultimately be enough to offset concerns of a supply glut, is difficult to say.
For now, I would suggest investors resist buying the energy share dip as things could easily get worse before they get better.
In the meantime, I would be looking at the shares that could benefit from falling oil prices such as Qantas Airways Limited (ASX: QAN) and Sealink Travel Group Ltd (ASX: SLK).
