Is the Woodside Petroleum Limited (ASX: WPL) share price a buy right now with oil prices so low across the world?
We live in a crazy world when oil prices go negative. Does anyone have a spare empty oil tanker they could lend?
Oil prices aren't very low in just the US, oil prices are at extreme lows across the world. They're so low the Australian government has decided it's going to build an energy reserve.
The coronavirus impacts are causing most forms of travelling to be heavily reduced, particularly planes and motor vehicles. This has caused the consumption of oil to fall over. There just isn't enough storage space for all of the oil being produced, even though global production has been somewhat reduced.
Is the Woodside share price a buy in this environment?
The Woodside share price has fallen 41% since the share market began to tank. It's actually down 46% since early January.
Oil shares are commodity-based and cyclical. And this crisis has shown how at mercy oil is to the economics of supply and demand.
But isn't the best time to buy resources shares when the resource price is at its lowest? And therefore this could be the right time to buy Woodside shares?
Don't get me wrong, I wouldn't want to buy shares thinking I'm going to hold for a decade or more. I believe there's going to be an ongoing shift towards electric vehicles. Oil demand could be lower for some time.
However, I'd guess there's a good chance that Woodside's share price could be a short-to-medium term opportunity whilst the market is so pessimistic about the oil price and oil shares. Just look at what happened after 2016 with BHP Group Ltd (ASX: BHP).
Chinese traffic is returning to normal. Areas of Europe are starting to open up again. New York seems to have gotten through the worst point.
I fully expect the Woodside dividend to be heavily reduced (if not suspended altogether) this year. But Woodside could produce very respectable returns over the next three to four years for oil investors.
But I don't think I could ever invest in it for my own portfolio. It doesn't have the type of business model I look for in a share.
