Woodside Petroleum (ASX:WPL) and ASX oil shares face a new threat

ASX oil shares like Woodside Petroleum Ltd (ASX: WPL) might be under pressure from Iranian oil coming to market, Here’s the tea

| More on:
oil drill in sunset

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX oil shares have not been having a great time of late. Although companies like Woodside Petroleum Ltd (ASX: WPL) have recovered strongly from the lows of last year, this recovery has stalled in recent months.

Woodside shares rose from a low under $16 a share last year to as high as $27.60 by the start of 2021. A recovery in crude oil prices from the negative levels they reached last year to back above US$60 a barrel largely assisted this rise.

But as of today, Woodside has sunk more than 16% from January’s highs and is trading for $22.40 a share at the time of writing. We see a similar pricing pattern across other ASX oil shares like Santos Ltd (ASX: STO), Oil Search Ltd (ASX: OSH) and Beach Energy Ltd (ASX: BPT).

None of these companies shave even come close to reaching their pre-COVID pricing heights. And that task might become even harder from here, at least in the short to medium term.

ASX oil shares: black gold or red ink?

According to a report from the Australian Financial Review (AFR) today, the global oil market might be awash with new crude oil supplies very soon. The AFR reports that a major oil exporter in Iran looks set to rejoin the global crude oil market.

Iran has been under severe economic sanctions for a while now, ever since former US President Donald Trump tore up the Iran nuclear deal in 2018, and reimposed heavy sanctions on the Iranian economy. These sanctions prevented Iran from exporting crude oil into the global economy, at least on the scale the oil-rich Middle-Eastern country is capable of.

The Iranian government and the Biden administration are reportedly negotiating an agreement that will curb Iran’s nuclear capabilities in a vein similar to the defunct 2015 agreement that Trump tore up. Such an agreement would pave the way for Iran to once again join the global oil market.

If this does happen, it could result in a major wave of fresh oil supply in the global economy. And, as classical economics tells us, more supply usually translates into lower prices.

That’s the last thing that Woodside, Oil Seach, Beach and the other ASX oil shares probably want to hear right now. So it’s no wonder why the Woodside share price is down 2.57% today (at the time of writing). Oil Search has fared even worse, down 4.05%. Iran’s gains are these companies’ losses today, it seems.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Energy Shares

a miner wearing a hard hat smiles as he stands in front of heavy earth moving equipment on a barren mine site.
Energy Shares

Here’s why the Pure Hydrogen share price is soaring 22% today

Shares in the clean energy company are flying high on Wednesday.

Read more »

gas and oil worker on pipeline equipment
Energy Shares

ASX 200 energy shares mixed amid bearish oil price outlook

How did a bleak broker note affect energy shares today?

Read more »

A woman standing on a path flanked by big green trees is surrounded by colourful balloons tumbling from the sky.
Share Gainers

Why did the Pure Hydrogen share price pop 21% today?

Why did Pure Hydrogen shares have such an amazing day today?

Read more »

Two miners stand in front of a large black wall of coal.
Energy Shares

ASX coal shares in the spotlight amid fresh supply warnings

Could this be an opportunity for Australian coal company's.

Read more »

A happy woman smiles as she looks at a tablet in a room with green plant life around her.
Energy Shares

AGL share price down amid Fortescue Future Industries hydrogen hub news

Hydrogen news is making headlines for AGL.

Read more »

Santos share price worker in front of oil mine puts thumbs up
Energy Shares

Why is the Woodside share price having such a strong start to the week?

The Woodside share price is rebounding alongside oil prices.

Read more »

A happy woman flies with arms outstretched on her boyfriend's back on the beach at dusk.
Energy Shares

Beach Energy share price climbs on BP deal

Beach Energy shares are defying the broader market sell off on the ASX today.

Read more »

A man looks frustrated with head on hand as he fills up car at service station.
Energy Shares

Sick of high petrol prices? Then buy this ASX share: analyst

Is it painful paying $2-something at the fuel bowser? Stock investors can get some of that money back by doing…

Read more »