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Today, the United States claims the top spot as the world's foremost oil-producing nation. This significant development has sent shockwaves through the energy shares of the S&P/ASX 200 Index (ASX:XJO), particularly due to a notable surge in crude oil reserves in the US, coupled with an ongoing record-breaking production of crude oil.
Major ASX oil and gas-focused energy stocks are witnessing fluctuations:
- Beach Energy Ltd (ASX: BPT) shares closed 4.10% down at AU$1.52 apiece.
- Woodside Energy Group Ltd (ASX: WDS) shares closed 0.8% at AU$32.13 apiece.
- Santos Ltd (ASX:STO) shares have experienced a drop of 1.94% to AU$7.06 apiece.
Additionally, investors are pondering the potential implications of the recent federal court ruling on the Barossa gas pipeline for Santos shares amidst the spike in US oil production and stockpiles.
Consequently, the S&P/ASX 200 Energy Index (ASX:XEJ) recorded a fall of 1.19% on 16 November 2023 due to the pressure on these ASX 200 energy shares.
Examining the International Oil Market
In the realm of global oil markets, ASX 200 energy shares are encountering substantial stress from the supply side. The Brent crude oil price has observed a decline of 0.8% overnight, presently resting at US$80.48 per barrel.
Although this figure marks an increase from the recent lows recorded on 8 November at US$79.54 per barrel, it signifies a staggering 16.4% drop from 27 September when the price stood at US$96.55 per barrel.
This considerable decrease has presented challenges for ASX 200 energy shares, reflected in the ASX 200 Energy Index's decline by 10.8% during the same period.
The recent data released by the US Energy Information Administration (EIA) indicates a potential positive for Australian motorists but could continue to exert pressure on Australian oil and gas stocks, particularly in the short term.
As per the EIA report, last week, US oil stockpiles surged by 3.6 million barrels, reaching 421.9 million barrels. To compare, analysts in a Reuters poll forecasted the increase of 1.8 million barrels, and exiting amount is 2x of the forecast.
Contributing further to the downward trend in global oil prices is the relentless oil production in the US, which stands at an all-time high of 13.2 million barrels per day.
John Kilduff, partner at Again Capital LLC, highlighted (quoted by Reuters),
Kilduff expressed skepticism about Saudi Arabia's ability to reduce production further to boost oil prices.
However, there's a brighter outlook for ASX 200 energy shares in the medium term, as both OPEC+ and the International Energy Agency (IEA) predict a rise in global demand by 2024.
Rob Thummel, Tortoise Capital Advisors’ portfolio manager, highlighted the unexpected substantial decline in diesel and gasoline inventories in the US as a potential support for demand of oil, as reported by Bloomberg. Diesel inventories plummeted by 1.4 million barrels last week, while gasoline inventories saw a decrease of 1.5 million barrels.
Thummel noted,
