Big Wins in Energy Sector as Oil Price Rises off its Bottom

At time of writing, a number of energy sector stocks are performing strongly, with Beach Energy Limited [ASX:BPT] a big winner with a 5.9% gain, trading at $1.435.

Other winners include Santos Limited [ASX:STO] and Woodside Petroleum Limited [ASX:WPL], up 4.32% and 1.44% respectively.

The price of oil has been rising off a bottom since it sat in the $42.50 range on Christmas Eve:

Oil Price

Source: tradingview.com

WTI is currently trading at $48.64.

Will oil price finally see a bounce?

The future remains clouded for the commodity, but the deal which saw planned OPEC+ production cuts has provided some support for prices.

On 7 December it was announced that the alliance would take 1.2 million barrels per day off the market.

This equates to an effective reduction of 3.02%, a rate higher than the 2.5% discussed earlier in December.

To further bolster prices, OPEC+ is reportedly set to release a table outlining voluntary supply cut quotas for its constituent countries.

The cuts are now underway in Saudi Arabia at least, with December crude exports from the country down to 7.253 million barrels per day from 7.717 million in November.

But swings in the market have been closely tied to swings in oil prices, indicating that the prospect of a global slowdown is weighing on investors’ minds, not just the standard supply demand story.

As a result, the chances oil will finally see a bounce could be limited if 2019 is the year we see a major correction, or even a recession.

Oil price forecast/outlook

S&P Global Ratings cut its price forecast/outlook for WTI from $60 to $50 for this year.

The company said that ‘The on-going trade war between the US and China as well as news of China’s economic slowdown, has led to concerns about the outlook for global demand.

Meanwhile, Moody’s has put a $50–$70 range out for the medium term which, depending on how you read it, could be interpreted as optimistic.

If you are in it for the long haul however, it may be worth considering that Beach Energy has, compared to its competitors, a relatively attractive P/E of 14.8.

Food for thought.

Regards,

Lachlann Tierney,

For Markets & Money


Lachlann Tierney is a writer for Markets & Money. He has lived and studied in the US, the UK, and Australia. With an MSc from London School of Economics (LSE) he brings a strong grasp of geopolitics and world affairs to his analysis. Lachlann is always on the lookout for the news that could give you an edge in tomorrow’s markets.


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