Investors buying S&P/ASX 200 Index (ASX: XJO) energy shares in hopes of a rebound in the global oil price may be waiting a while yet.
Global benchmark brent crude oil dropped another 1.5% overnight to trade for US$68.28 per barrel. That see the oil price down more than 15% since 15 January, when that same barrel was fetching US$82 per barrel.
As you'd expect, that's put pressure on ASX 200 energy shares, with the S&P/ASX 200 Energy Index (ASX: XEJ) down 10% year to date. And the index is down 23% since this time last year, when oil was also trading for US$82 per barrel.
Here's how these top ASX 200 energy shares have fared over these same periods:
- Woodside Energy Group Ltd (ASX: WDS) shares are down 7.7% year to date and down 21.8% in 12 months
- Santos Ltd (ASX: STO) shares are down 10.2% year to date and down 15.0% in 12 months
- Beach Energy Ltd (ASX: BPT) shares are down 1.4% year to date and down 16.7% in 12 months
- Karoon Energy Ltd (ASX: KAR) shares are up 8.2% year to date and down 20.7% in 12 months
So, what's been pressuring the oil price?
Supply, demand and Donald Trump
On the demand side of the equation, sluggish economic growth in China has been coupled with low energy demand growth across most of the world in 2025.
And with US President Donald Trump seemingly intent on rolling out global tariffs, energy demand growth may be even weaker than forecasts. Particularly in China, which could face significant headwinds from the US tariffs.
On the supply side, the oil price is facing an uphill battle after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) said it will begin to increase oil production once more after years of restricted output.
Commencing next month, the cartel will begin to restore 2.2 million barrels per day of production by 2026 after being urged by Trump to do so.
Meanwhile production in the US, the world's top crude producer, remains near all-time highs and will likely increase with Trump reiterating his mantra, "Drill baby, drill."
Strong levels of oil production from other non-OPEC+ members are also forecast to add to a looming supply glut.
ASX 200 energy shares on the back burner
With the oil price down 15% since January and potentially heading lower, many investors are pulling out of ASX 200 energy shares like Woodside and Santos.
Katana Asset Management portfolio manager Romano Sala Tenna has been cutting the fund's exposure to ASX oil stocks amid the bearish supply and demand outlook.
"We've decided to hold fire on buying back in and reversing those positions because the macro environment is still not what we want it to be," Sala Tenna said (quoted by The Australian Financial Review).
Sala Tenna added:
We do think that the outlook for oil prices is certainly more challenged now under Trump. If it continues to be a focal point of the Trump administration, then prices are likely to go lower.
Perennial resources fund manager Sam Berridge said:
OPEC was hoping that global demand will pick up in such a way that they could reverse those cuts and allow that oil to flow back into the market without impacting the price too much, but that hasn't happened.
What next for the oil price
While the future is inherently uncertain, a number of top analysts are now forecasting further downside for the oil price.
The analysts at Westpac Banking Corp (ASX: WBC), for example, forecast that Brent crude will slide to the mid-US$60 per barrel range inside the coming weeks. Westpac pointed to OPEC's decision to increase output following pressure from Trump along with more potential supply from Turkey and Kazakhstan as likely to drive further price falls.
And Citi believes ASX 200 energy shares could soon be looking at an oil price of just US$60 per barrel.
According to Citi global commodities strategist Max Layton (courtesy of the AFR):
Trump wants, needs, and is likely to persist in using all tools at his disposal to deliver lower energy prices.
Trump has identified energy prices and government spending cuts as the primary solutions. US$60 per barrel Brent would deliver at least a 0.4% of GDP or $US100 billion-plus deflationary impulse to the US economy.
