Oil Prices Fall, Dragging down Aussie Oil Companies with It

 The losing streak continues for oil with some of the major ASX-listed oil companies down today.

At time of writing Woodside Petroleum Ltd [ASX:WPL] is down by 2.23%, Santos Ltd [ASX:STO] fell by 3.26% and Oil Search Ltd [ASX:OSH] is down by 1.94%.

What happened with the Oil Price?

Overnight European and US stock markets fell. So did oil prices.

West Texas Intermediate fell by 4.38% closing at US$39.31 while Brent Crude oil fell close to 4% closing at US$41.44.

The main reason for the falls were worries that a second wave of the virus could hit Europe and the UK with many countries facing an increase in cases. So far, Spain has already introduced restrictions and the UK is thinking about it. More lockdowns could hit demand.

But oil prices could also be taking a supply hit at the same time. Libya’s National Oil Corporation (NOC) said they will be restarting oil production and exports. The Libyan National Army has been blocking the country’s oil ports for months now, but they say they’ll be lifting those blockades.

It’s been a tough year for oil companies

So much so that oil companies have been writing down their assets. On the other hand, green energy is seeing a resurgence.

Oil’s future is looking grim. Oil companies already know it, and they are starting to prepare.

Last week, BP’s released ‘Energy Outlook 2020’ sees demand for oil declining in the next 30 years. You can read more on this here.

And then yesterday, Shell said it’s embarking on ‘Project Reshape’.

From Reuters:

Royal Dutch Shell is looking to slash up to 40% off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus more on renewable energy and power markets, sources told Reuters.

Shell’s new cost-cutting review, known internally as Project Reshape and expected to be completed this year, will affect its three main divisions and any savings will come on top of a $4 billion target set in the wake of the COVID-19 crisis.

Reducing costs is vital for Shell’s plans to move into the power sector and renewables where margins are relatively low. Competition is also likely to intensify with utilities and rival oil firms including BP and Total all battling for market share as economies around the world go green.’

It’s why we think there are better plays out there, especially if you are looking for dividends.

Check out editor Greg Canavan’s free report ‘Five Dividend Stocks set to Thrive in the Post-Pandemic Era’ .

You can access it here.


Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

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