Oil Prices Fall Further
Brent Crude Falls Below $50 a Barrel
By Tommy Stubbington and Eric Yep
Updated Jan. 7, 2015 3:25 a.m. ET
Oil prices fell further on Wednesday, with the Brent crude benchmark falling below $50 a barrel for the first time since 2009.
Brent futures dropped by more than 2% to $49.92 a barrel on London’s ICE Futures Exchange in early European trade. At last year’s peak in June, Brent traded at more than $115.
Wednesday’s decline is the latest landmark in a six-month long selloff spurred by growing production in the U.S. and fears that a slowdown in global growth will crimp demand.
Some weak U.S. service sector and manufactured goods reports on Tuesday added to those concerns.
“The impact from weak data in the U.S. seems to have added to concerns of falling oil prices and slowing global activity,” analysts at Barclays said.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February recently traded at $47.88 a barrel, down $0.05 in the Globex electronic session.
The last time Brent crude settled below $50 a barrel was in April 2009. The global oil benchmark is down by about 11% so far this year.
While the current price rout has been driven mainly by oversupply, as Middle Eastern producers fight for market share with U.S. shale companies, it has raised concerns that demand itself may take a big hit this year.
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I don’t buy the “oversupply” argument. It’s not as if all of a sudden there was a huge change in production in September... Everyone has seen the chart of US production growing exponentially for the last three years. Sure some of the “oversupply” has an impact but not to cause a price collapse of over 50%. That just fails basic math.
The other major piece is the ROW falling apart. The U.S. remains strong (relatively) but will we be dragged down with them?
How much of this is short covering?
Seems we might be nearing a bottom as the fundamentals just don’t support a 50% sustained decline. Now the climb back up might be long. But I’m looking at some companies who are off 60-70% and think they might be good deals.