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Energy stocks within the S&P/ASX 200 Index (ASX: XJO) are experiencing downward pressure today as global oil prices continue their decline. The latest drop in Brent crude oil prices has impacted the Australian energy sector, with major oil and gas companies seeing significant decreases in their share prices.
Oil Price Decline
Brent crude oil, the international benchmark, has fallen by 3.5% to trade at US$69.39This marks a notable drop of approximately 24% since early April, bringing prices to levels not seen since December 2021The decrease in oil prices has led to a sell-off in ASX energy stocks, reflecting the broader trend in the market.
Impact on Major ASX 200 Energy Stocks
The latest decline in oil prices has had a marked impact on the major players in the ASX 200 energy sector:
- Woodside Energy Group Ltd (ASX:WDS): Shares are down by 1.8%.
- Santos Ltd (ASX:STO): Shares have decreased by 1.2%.
- Beach Energy Ltd (ASX:BPT): Shares are lower by 1.6%.
In comparison, the broader ASX 200 Index is down 0.3%, while the S&P/ASX 200 Energy Index (ASX:XEJ) has fallen by 1.2%.
Dual Pressures on ASX 200 Energy Stocks
ASX 200 energy stocks are facing challenges on two fronts: potential oil supply gluts and weakening demand.
Supply Concerns: The Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC+) have been struggling to influence the market as they once didRecently, OPEC+ decided to delay its planned restoration of production cuts by two monthsThe intention was to support the plummeting oil prices by rolling back its voluntary production cuts of 2.2 million barrels per day, initially set to begin in October.
However, OPEC+ no longer holds the same market power it did in previous decadesThe United States, now the world's largest oil producer, is on track to set new production records in 2025Major non-OPEC producers, such as Canada and Brazil, are also maintaining their output levels.
Demand Concerns: Weak economic data from the US and China is further pressuring oil prices and, consequently, ASX 200 energy stocksLower economic growth in these two major economies suggests reduced oil demandDennis Kissler, Senior Vice President for Trading at BOK Financial Securities, highlighted that softening demand from China is a significant bearish factor in the market.
Oil market strategist Clay Seigle noted that advanced economies are seeing minimal oil demand growth this yearHe attributed this to ineffective fiscal stimulus measures in China, which have failed to boost the construction sector and consequently decreased diesel demand.
Looking Ahead
The future trajectory of Woodside Energy Group Ltd and other ASX 200 energy stocks will largely depend on the global demand for oilIf the US Federal Reserve's efforts to achieve a 'soft landing' for the economy succeed, increased demand from the US could push oil prices higherSimilarly, if China introduces more stimulus measures to invigorate its economy, it could also result in higher oil prices.
Investors should monitor the International Energy Agency’s upcoming monthly outlook for global oil supply and demand, scheduled for release on Thursday, as it may provide further insights into the market's direction.
