The oil price fell from a four-year high of $US86 a barrel in October last year to hit a low of $US50 the day before Christmas. It has since edged back up to about $US69 a barrel.
As the LNG price is driven by the oil price, typically following it with a three-month delay, the LNG price has now also begun to drop.
Santos dipped 4.2 per cent from its week high on Wednesday to $6.67 on Friday. Beach Energy dropped around 7.5 per cent to $2 in the same period, temporarily knocking about $540 million off its value.
Oil Search lost 3.8 per cent from its Wednesday high to trade at $7.89. Woodside’s share price fell by 2.7 per cent this week to $34.09, wiping about $950 million off its market cap.
The falling oil and LNG spot prices on Thursday had been a been a “double-whammy” for those stocks, is how one energy analyst explained the share price declines.
“Beach Energy is typically hit the hardest by these dips as it has the highest correlation to oil prices,” he added.
The Australian Competition and Consumer Commission (ACCC) has also lowered its forecast LNG spot prices for 2019, flagging more pain ahead. It dropped its May LNG forecast price sharply, from $6.20 a gigajoule in March down to $5.60 as of April.
The ACCC expects LNG prices will be weaker than first forecast before spiking in late 2020.
Rystad Energy analysts dismissed the falls as temporary, saying the oil price would rally through to the first half of 2020. They forecast a boost for the oil price from new International Marine Organisation (IMO) rules that require better quality fuels for ships, which is expected to drive demand.
But prices would probably lose momentum after, the broker said, citing increasing levels of US oil that would wipe out the effects of global production cuts made by the Opec oil cartel and Russia.
“We retain our bullish stance for the second half of 2019 and first half of 2020 as we anticipate Opec and Russia to extend production cuts through 2019, while we also expect bullish oil market effects due to the introduction of IMO 2020 regulations on sulfur content in marine fuels,” Rystad Energy’s head of oil market research Bjørnar Tonhaugen said.
“We tentatively expect a correction in prices, possibly already from the second half of 2020 and into 2021, as the IMO effect fades.”
Covering energy and policy at Fairfax Media.