It looks set to be a very disappointing end to the week for the Australian energy sector after oil prices crashed lower overnight.
At the time of writing many of the country's leading energy producers have sunk notably lower after investors rushed to the exits in their droves.
Here is the state of play in early trade:
- The Beach Energy Ltd (ASX: BPT) share price is down 2%.
- The BHP Group Ltd (ASX: BHP) share price has fallen 0.6%.
- The Oil Search Limited (ASX: OSH) share price has tumbled 3% lower.
- The Origin Energy Ltd (ASX: ORG) share price is off 3%.
- The Santos Ltd (ASX: STO) share price has dropped 2%.
- The Senex Energy Ltd (ASX: SXY) share price has fallen 1.5%.
- The Woodside Petroleum Limited (ASX: WPL) share price is down 2.5%.
What happened to oil prices?
According to Bloomberg, overnight the WTI crude oil price sank 3.9% to US$56.51 a barrel and the Brent crude oil price tumbled 4.3% to US$69.47 a barrel.
This was driven by a smaller than expected decline in U.S. crude inventories and fears that the U.S.-China trade war could cause a global economic slowdown.
According to CNBC, the U.S. Energy Information Administration (EIA) said crude stockpiles fell nearly 300,000 barrels last week. This was significantly less than the 900,000-barrel decline analysts had forecast and well below the 5.3 million-barrel drawdown the American Petroleum Institute reported.
This left crude stockpiles at 476.5 million barrels, which is around 5% higher than the five-year average for this time of year.
Abhishek Kumar, head of analytics at Interfax Energy in London, said: "The oil inventories report has added to the bearish sentiment prevailing in today's trading session. Demand-side concerns emerging from the ongoing U.S.-China trade war are expected to remain the key driver weighing on oil prices."
This sentiment was echoed by Bernstein Energy which said that: "An escalating U.S.-China trade war represents a risk to oil markets."
It expects a full-blown trade war to result in global oil demand growing just 0.7% this year, which is half the current estimate.
In light of this, it looks like the energy sector could be a volatile side of the market over the coming months.
