Why is the Santos share price sinking 5% today?

The Santos Ltd (ASX: STO) share price is starting the week deep in the red.

In morning trade, the energy producer’s shares are down almost 5% to $7.07.

Why is the Santos share price tumbling lower?

Investors have been selling down the Santos share price on Monday following a broad market selloff and significant weakness in oil prices.

In respect to the latter, according to Bloomberg, the WTI crude oil price plunged 5.7% to US$78.74 a barrel and the Brent crude oil price dropped 4.75% to US$86.15 a barrel on Friday night.

This led to the fourth consecutive week of declines for both benchmarks, which is the first time this has happened since December of last year. It means that both WTI and Brent are now trading at their lowest levels since mid-January.

What’s going on?

Traders were selling down oil amid concerns that a global recession could weigh heavily on demand.

Edward Moya, senior market analyst at data and analytics firm OANDA, commented:

Oil tanks as global growth concerns hit panic mode given a chorus of central bank commitments to fight inflation. It seems central banks are poised to remain aggressive with rate hikes and that will weaken both economic activity and the short-term crude demand outlook.

While Santos is highly profitable still with oil prices at these levels, it just won’t be as profitable as many in the market were forecasting if prices don’t rebound.

This could lead to consensus downgrades to earnings estimate and valuations in the near future.

The post Why is the Santos share price sinking 5% today? appeared first on The Motley Fool Australia.

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More reading

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• Own Santos shares? Get ready to receive your dividends
• Is the Santos share price ‘starting to resume its uptrend’?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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