Why... are oil stocks not dropping?

Currency tailwinds and confusion over Iran’s potential role have cushioned our local stocks but the crunch is still coming.

Summary: The oil price has fallen sharply since mid-June due to concern about a supply glut, but Woodside and Oil Search shares have been protected as most of their revenue comes from selling LNG under long-term contracts. One investment bank says oil is a “buyer’s market”, and that oil producers need to accept the low-price environment and then attack costs.

Key take-out: There is little Australian investors can do except watch events unfold on international markets. But even if Australian oil and gas producers are protected by LNG contracts, they could eventually feel the pinch.

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