In afternoon trade on Monday the S&P/ASX 200 index is on course to start the week with a sizeable decline. At the time of writing the benchmark index is down 1.3% to 6,115.8 points.
One of the biggest drags on the benchmark index today has been the energy sector.
The shares of a number of leading energy producers have posted large declines today, leading to the S&P/ASX 200 Energy index recording a 3.3% decline to 11,073.2 points at the time of writing.
Some of the biggest fallers include:
- The Beach Energy Ltd (ASX: BPT) share price is down 5% to $2.04.
- The Oil Search Limited (ASX: OSH) share price has fallen over 3% to $8.01.
- The Origin Energy Ltd (ASX: ORG) share price has tumbled 4.5% to $7.21.
- The Santos Ltd (ASX: STO) share price is down almost 4% to $6.92.
- The Woodside Petroleum Limited (ASX: WPL) share price has dropped 3% to $34.76.
- The Worleyparsons Limited (ASX: WOR) share price has plunged 5.5% lower to $14.02.
Why are energy shares crashing lower?
Oil prices dropped notably lower on Friday and have continued their slide on Monday amid concerns that dovish comments from the U.S. Federal Reserve and weak manufacturing data in Germany and France could be a sign of a slowdown in global economic growth.
According to Bloomberg, the WTI crude oil price has fallen a further 0.9% to US$58.50 a barrel and the Brent crude oil price is down another 0.8% to US$66.49 a barrel.
In addition to this, the weak data has sparked fears that the U.S. could be on the verge of a recession according to CNBC.
This appears to have spooked investors because a U.S. recession would almost certainly lead to a sharp drop in demand for oil and put pressure on prices.
Should you buy the dip?
If you feel confident that oil prices will rebound strongly then I think this ought to be considered a buying opportunity.
However, I feel the prudent thing to do is to wait and see how oil prices and energy shares fare in the coming weeks and months before making a move.
