Woodside Petroleum Ltd (ASX: WPL) shares have been smashed in 2020. The ASX 200 oil share is down 37% in 2020 (at the time of writing) amid an oil price war between Saudi Arabia and Russia.
But is Woodside going to keep falling lower or is it a good place to invest $1,000 right now?
Why are Woodside Petroleum shares falling lower?
The coronavirus pandemic has hit ASX 200 shares hard, but ASX energy shares have had something else to worry about. Tensions have been heightened between OPEC+ and Russia in 2020. The ongoing stand-off between the world’s largest oil producers has led to oversupply and even sent the oil price negative in May.
Woodside Petroleum shares have been smashed in response and Australia’s largest oil and gas producer has shed billions in value. However, there could be light at the end of the tunnel for Woodside and its shareholders.
There are signs of slowing oil supply in the world. OPEC+ has delivered oil production cuts which could help support global crude oil prices. The global alliance will trim supply by 9.7 million barrels per day or roughly a 10% cut to current levels.
That’s good news for the Woodside Petroleum share price. Higher oil prices are good for producers as they realise a higher average sale price. For shareholders, that could mean higher earnings and strong dividends.
Should you invest $1,000 in Woodside?
ASX energy shares are struggling right now. Woodside is being hit particularly hard despite slashing jobs to try and conserve cash amid the COVID-19 pandemic.
If you want to invest $1,000 in Woodside Petroleum shares, it could turn out to be a great investment. However, I think it would have to be part of a highly diversified ASX share portfolio. ASX energy shares like Woodside are volatile at the moment and no one knows how geopolitics will play out in the current environment.
That means Woodside Petroleum shares could fall lower before they recover in the long-term. I don’t think I’m willing to buy just yet, but a 37% share price decline is certainly tempting to any value investor.
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Motley Fool contributor Ken Hall 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.