Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

The ASX 200 sector in the hot seat this morning

Published 21/01/2020, 09:20 am
© Reuters.
AXJO
-
LCO
-
2222
-

The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index will trade without a directional lead from Wall Street on Tuesday as US markets are shut for a holiday. But there’s one sector that’s likely to find support today.

This is the energy sector, which will be emboldened by the jump in the overnight oil price due to supply fears from Libya and Iran, although the commodity returned some of the day’s gains at the close.

But the Brent crude benchmark is still hovering above US$65 a barrel, or 0.4% higher, even as a ceasefire was declared in Libya.

Libya’s double-edge sabre Fighting between the government and rebel forces led by Khalifa Haftar cut off a key pipeline and shut down two oil fields in that country, which pumps around 1.2 million barrels of oil a day.

This sent the Brent price surging to US$66 a barrel before news out of Berlin of a truce triggered profit taking.

Iraq unrest adding support Meanwhile, civil unrest in Iraq is also adding support to the oil price. According to Bloomberg, security guards at the Al Ahdab oil field forced the shutdown of the facility after they blocked access to the site to protest for better job security.

Looking nearer to home, major ASX energy stocks like Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH) will be on watch.

While some investors may view the fact that the oil market was unable to hold the highs for the trading day as a negative, the outlook remains highly volatile.

Volatility is the only guarantee Tensions in the major oil producing region makes forecasting the oil price a mug’s game. Aside from Libya and Iraq, Iran is likely to be plotting their revenge on the US and its allies for the killing of General Qassem Soleimani.

The attack on Saudi Arabia’s Aramco (SE:2222) oil processing facilities at Abqaiq and Khurais in September last year isn’t far from investors’ mind.

Foolish takeaway On the other hand, the market looks like it’s getting better at ignoring what’s deemed to be short-term supply disruptions. Just like the overnight whipsawing of the oil price, the spike in crude on the Aramco facilities was also short-lived.

Oil bears will be unperturbed by the firmer oil price too. They will point to the oversupplied market now that the US has become a major oil and gas exporter thanks to shale.

Further, the relatively high oil price is supported by an artificial factor – the quotas set by OPEC and Russia.

The bloc may have shown better than expected discipline in restricting output, but there will be questions of how long this will last, especially now that the Aramco public float has been completed.

The post The ASX 200 sector in the hot seat this morning appeared first on Motley Fool Australia.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020

This Article Was First Published on The Motley Fool

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.