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Why ASX 200 oil stocks like BHP are on watch today

Kenneth Hall
Oil & Gas stocks

The BHP Group Ltd (ASX: BHP) and fellow ASX 200 oil stocks will be worth watching in early trade.

Iran’s discovery of a potential 50 billion barrel oil reserve and BHP’s decision to go hard into the oil and gas sector could weigh on the company’s share price.

What could move the BHP share price?

According to an article in the Australian Financial Review (AFR), BHP is doubling down and spending big in oil and gas. The move comes as BHP looks to boost returns for shareholders that outperform its diversified mining activities.

BHP’s oil and gas production has been low since a failed investment in US shale, but there are several projects in the pipeline.

BHP is reportedly investing in new oil projects across the Gulf of Mexico, Mexico and Trinidad & Tobago.

The Aussie resources group is set to ramp up capital expenditure to fund the ventures with an estimated US$2.5 billion spend over the next 3 years through to FY22.

What else is putting ASX 200 oil stocks under pressure?

Iranian President Hassan Rouhani announced yesterday that the Gulf nation has found a new oil field. The new resource could contain more than 50 billion barrels of crude oil and would boost its reserves by a third if proven.

The news comes as Iran continues to face the squeeze of US sanctions after the breakdown of a nuclear deal between the two last year.

The one saving grace for the ASX 200 oil stocks is that while the reserve is big, crushing sanctions still means supply is heavily restricted. Countries that trade with Iran face severe punishment from the US Government under the current restrictions.

Foolish takeaway

The BHP share price edged 0.32% lower on Monday to $37.18 per share. I would be keeping a close eye on the ASX 200 oil stocks today as the market adjusts valuations accordingly.

The post Why ASX 200 oil stocks like BHP are on watch today appeared first on Motley Fool Australia.

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Motley Fool contributor Kenneth Hall 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. 2019