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Oil prices crash lower: Where next for Beach Energy Ltd and Santos Ltd shares?

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).

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Motley Fool contributor James Mickleboro has no position in any of the 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 Scott Phillips.

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