ASX-listed energy stocks are among the worst performers on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index as the outlook for the oil price darken in overnight trade.
The Woodside Petroleum Limited (ASX: WPL) share price tumbled 1.5% to $34.51, the Oil Search Limited (ASX: OSH) share price lost 1.4% to $6.98 and the Beach Energy Ltd (ASX: BPT) shed 3.1% to $1.87 in morning trade.
In contrast, the top 200 stock index is trading just above breakeven as gains in the financial and healthcare sectors are offsetting the weakness.
Oil prices take a hit from growing inventories
You can blame the overnight oil price fall to a six-month low for the sell-off among our energy stocks. The Brent crude benchmark slipped below US$60 a barrel for the first time since January this year.
While it did manage to claw back to US$60.20 a barrel at the time of writing, that's unlikely to be much of a confidence booster.
The sell-off in the commodity came after the US government released inventory data that showed stockpiles of oil in the world's largest economy increased to their highest level since July 2017, according to a CNBC report.
Crude inventories increase 2.2 million in the week to June 7, defying expectations for a slight drawdown of 481,000 barrels.
Bearish sign for global growth
This is fuelling worries that the economy is slowing due to the ongoing trade spat between China and the US, and experts believe the price of oil will slip further after crashing into a bear market (defined by a peak-to-trough fall of 20% or more).
What's alarming is that the impact of a key support factor for oil – OPEC and Russia – appears to be waning.
The oil cartel plus Russia have agreed to output cuts and there was speculation that they could keep the quotas in place for longer or even lower them further to keep the supply and demand balance.
While that looks very likely, Goldman Sachs believes the outcome will only be "modestly supportive" of oil prices and that the market will come under renewed pressure in the second half of this calendar year as new infrastructure allows a surge of US production to come online.
Unless we start seeing signs of global economic growth emerging (maybe from rate cuts or a US-China trade deal), our energy stocks are likely to continue to underperform.
But not all sectors are stuck under a bearish cloud. The experts at the Motley Fool are feeling bullish about the prospects for these ASX stocks in 2019.
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