The market was lead lower this week by the oil price that is currently around $40 per barrel.
The oil price pushed Santos, and Woodside and BHP lower. When coupled with the banks these factors brought the whole market down.
At present, oil prices seem set to stay lower as Oil Company’s increase production to ensure cash flow to keep their business afloat. Keep in mind that generally the oil price is closely controlled through production level via OPES.
Currently, the economic principals of supply and demand have control. You will remember that about a year ago Saudi Arabia refused to allow OPEC to increase prices by limiting production of crude oil.
The general idea was to drive America’s shale-oil producers out of business. The issue is, will these shale oil producers simply ramp up production once the oil price rebounds.
World Energy Outlook released a position that the oil will have sluggish recovery; the best expectation is $80 per barrel by 2020, the alternative is between $50-$60 a barrel by 2020.
Either way we are expecting a slow recovery with oil stocks.