Woodside Energy Group Ltd (ASX: WDS) shares opened sharply lower today, only to slide further.
In early afternoon trade on Wednesday, shares in the S&P/ASX 200 Index (ASX: XJO) energy stock are changing hands for $26.87 apiece. That's down 2.4% from yesterday's close of $27.53 a share.
For some context, the ASX 200 is down 1.7% at this same time.
It's not just Woodside shares that are trailing the sinking benchmark today.
The Santos Ltd (ASX: STO) share price is down 3.0%, and Beach Energy Ltd (ASX: BPT) shares are down 4.0%.
Indeed, the entire Aussie energy sector is underperforming, as witnessed by the 2.9% intraday decline in the S&P/ASX 200 Energy Index (ASX: XEJ).
Here's what's going on.
Why are Woodside shares tumbling?
Woodside shares, along with Santos and Beach Energy, are feeling the heat (or lack of it) from plunging global oil prices.
The Brent crude oil price dropped 4.8% overnight to US$73.30 per barrel. That sees Brent crude oil prices down more than 16% since 5 July, when that same barrel was worth US$87.43.
It's a similar story for West Texas Intermediate (WTI). At the current US$69.81 per barrel, WTI is now trading at its lowest levels since early January.
The oil price, and by connection Woodside shares, have come under pressure on several fronts.
First, traders have been pricing in the potential for a sustained reduction of half a million barrels a day of oil from Libya as the nation's rival governments vie for control. However, news has now broken that Libyan production could recommence and bring that extra supply back into the markets.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) has also flagged its intentions to slowly remove the cartel's voluntary supply cuts, potentially adding another 180,000 barrels of oil per day to global supplies commencing in September. Though with the recent oil price falls, OPEC+ may yet reconsider this plan.
On the demand side, the oil price – and Woodside shares – are catching headwinds from China, the world's top oil importer. With China's economy showing few signs of achieving the government's modest growth targets, the world's number two economy may demand less energy.
Also giving energy investors the jitter was the latest data out from the United States Institute for Supply Management, which revealed that manufacturing activity in the world's number one economy fell again in August.
Commenting on the plunging oil price, Toshitaka Tazawa, an analyst at Fujitomi Securities said (quoted by Reuters)
Selling continued in Asia amid expectations of a potential deal to resolve the dispute in Libya. The market remained under pressure also because of concerns over sluggish fuel demand following weak economic indicators from China and the United States.
Robert Yawger, director of the energy futures division at Mizuho Securities USA, added (quoted by Bloomberg), "A toxic mix of excess supply, sliding demand, bearish technicals, and bad product fundamentals are conspiring to destroy crude oil today."
With today's intraday losses factored in, Woodside shares are down 30% since this time last year, when Brent was trading for US$89 per barrel.
