It could be a very tough day for ASX 200 energy shares on Wednesday after oil prices collapsed during overnight trade.
According to CNBC, the West Texas Intermediate (WTI) crude oil price has dropped a sizeable 5.5% to US$71.50 a barrel and the Brent crude oil price has sunk 5.2% to US$75.16 a barrel.
This could be bad news for ASX 200 energy shares Beach Energy Ltd (ASX: BPT), Karoon Energy Ltd (ASX: KAR), Santos Ltd (ASX: STO), Woodside Energy Group Ltd (ASX: WDS), which are susceptible to movements in the oil price.
What's going on with oil prices?
Oil prices sank to a five-week low following a selloff on Wall Street amid concerns over a U.S. debt default and expectations that fuel demand could suffer if central banks in the U.S. and Europe raise interest rates again this week.
In respect to the latter, the U.S. Federal Reserve has kicked off its monetary policy meeting on Tuesday and will make a decision on interest rates overnight on Wednesday.
PVM's oil broker, Tamas Varga, told CNBC:
The unpredictable action of central banks in their mission to tame elevated consumer and producer prices, the rhetoric and action of consuming and producing nations have all cast a rather long shadow of doubt on prospects going forward.
Craig Erlam, a senior market analyst at OANDA, also highlights that these concerns have overshadowed news that OPEC's oil output fell in April. He said:
The post-OEPC+ gains have now been wiped out which suggests traders are now of the belief that the economic outlook has deteriorated to the extent that the output cut won't create the deficit that was feared.
All in all, these are interesting times for oil prices and ASX 200 energy shares.
