Local stocks Santos and Beach Energy were among the worst performers on the ASX as the oil price collapsed
A combination of coronavirus fears and the breakdown of the OPEC oil cartel led to the biggest stock sell-off since the Global Financial Crisis.
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Shares in Adelaide companies Santos and Beach Energy were among the worst performers on the share market on Monday, amid the biggest one-day sell off since the Global Financial Crisis.
A combination of coronavirus fears and the breakdown of the OPEC oil cartel over the weekend conspired to push the oil price down more than 30 per cent, leading to a sell off in Australian oil stocks.
Santos shares fell a massive 27 per cent, and were the second-worst performer on the ASX on Monday, with Oil Search, down 35.2 per cent, the worst. At $4.89, Santos shares have fallen 45.8 per cent since January 8, when they hit a 12-month high of $9.07. Beach Energy shares dropped almost 20 per cent to $1.33 on Monday. They were trading at $2.91 in mid-January.
CommSec chief economist Craig James said the collapse of OPEC, which regulated how much oil countries such as Russia and Saudi Arabia would pump, and which helped control world oil prices, meant that “From here, effectively anything may happen’’.
“Saudi Arabia and Russia may open the floodgates, lifting oil output in an attempt to lift market share,’’ Mr James said. “But it is also possible that cooler heads will prevail and oil producers may return to the negotiating table.’’
Brent crude futures, which had traded as high as $US65 a barrel as recently as January, plunged from $US45 a barrel on Friday to around US$32 at midday on Monday.
On the broader market only three of Australia’s top 200 stocks finished in the black on Monday, as the benchmark ASX200 dropped 7.3 per cent, or 455.6 points, to close at 5760.6, wiping $155 billion off the value of Australian shares.
The broader All Ordinaries index lost 7.4 per cent, or 465.1 points, to finish at 5822.40. In percentage terms, it was the ASX200’s biggest loss since an 8.34 per cent drop on October 10, 2008, when markets had a meltdown during the GFC. In points terms, the 456-point drop was the ASX200’s biggest loss ever. The markets have now fallen for nine of the past 11 trading days, after a strong start to the year which pushed the ASX200 to a record high of 7162.49.
CMC Markets chief market strategist Michael McCarthy said it was “wholesale panic’ on Monday. Federal Treasurer Josh Frydenberg sought to calm things down, saying volatility was not uncommon in times like these and there were a number of factors at play. But Wall Street looked to be headed for a major sell-off overnight. Futures on the S&P 500 Index stopped trading after falling 5 per cent, triggering “circuit breaker” limits that prevented further falls.
An early afternoon flash crash also sent the Aussie dollar plummeting to a new 11-year low against the US greenback on Monday, with the local currency diving from US66c to a low of US63.04c before bouncing back to US65.4c in the late afternoon.