ASX energy and oil companies appeared to spring a financial leak late yesterday. At close of trade yesterday, the Woodside Petroleum Limited (ASX: WPL), Oil Search Ltd (ASX: OSH), and Beach Energy Ltd (ASX: BPT) share prices were down 0.45%, 0.71% and 0.85%, respectively.
All three companies were trading higher than the previous day's close, until it was announced the container ship blocking the Suez Canal was successfully re-floated.
The Woodside share price finished the day at $24.43, Oil Search at $4.19, and Beach was $1.76. By comparison, the S&P/ASX 200 Index (ASX: XJO) ended the day 0.36% lower.
Background and how it affected ASX energy companies
Six days ago, an Evergreen Marine Corporation cargo ship became horizontally lodged within Egypt's Suez Canal, blocking the shipping route. The ship is 400m long and was blown off course during a sandstorm. Its hull became trapped on the embankment and it could not be moved. The ship, being so long, blocked the entire canal in both directions.
The waterway, which connects the Red Sea to The Mediterranean, dramatically cuts the shipping time to freight goods. In fact, 12% of all global trade and 9% of all petroleum trade goes through the Suez Canal.
As so much of the global energy supply goes through the canal, the supply of oil was deeply disrupted. A decrease in supply led to an increased price of crude oil. As the price of oil increased, the share price of ASX energy producers increased likewise.
Due to the blockage, some ships were travelling around the African continent to reach their destinations.
Suez relief
At 4:30 am Egyptian time, the Evergreen ship was re-floated. The ship was able to continue its journey to Rotterdam, The Netherlands. Normal shipping operations resumed soon after in the canal.
The MV Ever Given was successfully re-floated at 04:30 lt 29/03/2021. She is being secured at the moment. More information about next steps will follow once they are known. #suezcanel #maritime pic.twitter.com/f3iuYYiRRi
Inchcape Shipping (@Inchcape_SS) March 29, 2021
As the Suez Canal returned to business as usual, the disruption on global energy supply was over. Accordingly, the market reacted, and the price of oil fell. As of writing Texas crude oil fell by 2.31% on the commodities market to be at US $59.56.
Just as the market giveth, the market taketh away. With the dramatic fall in the price of oil, investors offloaded their ASX energy stocks. The sweet taste of Texas tea can leave a bitter aftertaste if you let it boil over.
ASX energy companies share price snapshots
ASX energy companies' share price movements are highly correlated with the price of oil. When OPEC cut production at the beginning of March, both the price of oil and ASX energy company share prices boomed.
All three aforementioned companies have staged healthy recoveries since the COVID-19 panic selloff last year. The Woodside share price is up 45.1%, Oil Search is up 83%, and Beach Energy is up 68.4%.
The market capitalisations of these companies are $23.5 billion, $8.7 billion, and $4.0 billion, respectively.
