Posted on 08/21/2015 10:14:04 AM PDT by thackney
U.S. oil fell closer to $39 per barrel on Friday, as traders continued a rout that is likely to hand the next-month contract its longest string of consecutive weekly losses since the bust of 1986.
Fears that China’s economy may be sputtering and signals that global production is on the rise have driven oil lower for the past seven weeks, and barring a large recovery Friday, soon to be eight weeks. Those concerns combined once more on Friday as an early economic indicator in China came in at a six-year low.
“(China’s) stock market problems, their currency problems, all these are signals that they are having a general slowdown,” said Arthur Gelber, founder and president of Gelber & Associates.“That will cause a lot of shaking and quaking in Houston.”
West Texas Intermediate grade oil for delivery next month, the benchmark U.S. price, fell as low as $40.13 per barrel in early New York Mercantile Exchange trading Friday. The contract had rebounded slightly to $40.46 per barrel shortly after.
Brent crude, the international benchmark, lost $1.28 per barrel to $45.34 on London’s ICE Futures Europe.
On Friday, the preliminary August reading the Caixin China Purchasing Managers Index, one measure of China’s economic health, fell again despite the government’s efforts to support the country’s economy. China is the the world’s second-largest oil consuming economy.
The Caixin index fell to early reading of 47.1 in August, down from 47.8 in July. Figures under 50 indicate a contraction.
“It’s just continuing the hemorrhaging of crude oil prices in a market that is overwhelmed with bearish news,” said Andy Lipow, president of Lipow Oil Associates in Houston.
Although U.S. producers have gradually ratcheted back production, anxiety about the Chinese economy has started to infect market sentiment outside of Asia, as traders fear that the news signals a slowdown in the growth rate of economies around the world amid a growing global glut of crude, Lipow said.
The anemic global economy has worried traders who had seen economic growth as a key to absorbing the glut of oil that has forced down prices since last year.
And with cuts from North American production coming slowly and no cuts at all proposed by the Organization of the Petroleum Exporting Countries, analysts have begun to compare the bust not just to the brief downturn of 2009, but also the more painful crashes previously.
Oil bottomed at $31.41 per barrel in the crash of 2008.
“The key takeaway from both the 1986 and 1999 bear market cycles, in our view, is that it took a change in OPEC policy to help the market reverse the slide,” said Tim Evans, a energy futures specialist at Citi Futures. “In fact, in the 1999 case it took more than one round of cuts in order to fully rebalance the market. Absent this kind of shift we don’t anticipate a V-shaped price recovery, with a broad U or even an L as the most likely alternatives.”
Traders are expecting the Baker Hughes rig count at noon on Friday. The data is seen as a proxy for oilfield activity.
http://online.wsj.com/mdc/public/page/2_3028.html?category=Energy&subcategory=Petroleum
We still haven’t gone through the purge yet. Things won’t rebound until after the purge.
If it gets to $25, I win a large bet with my uncle, if he makes it that long.
What is the perfect price for oil that makes everyone feel happy and safe?
We still haven’t gone through the purge yet. Things won’t rebound until after the purge.
What do you mean by the “purge”? Thanks.
When they say a certain type of oil is a ‘benchmark’ does that mean other, less quality types, may be lower, or that the benchmark is the lowest of them all?...................
If you had an oil that made everyone feel happy and safe (is that you, Professor Snape?) it would still be worth whatever someone will give you for at, as my late father said about a sick chicken.
I’ll bet you could get a lot, though!
By definition, the price at which it currently sells. The very definition of a free market.
I remember how Bachmann was ridiculed about returning to $30 a bbl oil.
the “Throw Israel Under The Bus” dividend.
And a gallon of gas here in So Cal is still 3.50+.
Oil could be given away for free and CA would still charge $2.00/gal for it!
So a barrel of oil is the same price as it was in the 1990s.
However, we do not have 1990s gas rates of $1 a gallon.
And the hits keep comin’...
When the price is low enough, long enough, that the marginal producers shut down.
With the decrease in the amount of production, combined with a low price (which will help increase consumption), the price will bottom out and slowly rise. It will not happen overnight. I think the prices will have to bottom out for about 6 months. Can’t say what the bottom will be - maybe $30-$35. There may be some spikes downward, but those will be very short term.
In the spring, when the price hit the low 40s and began to rebound, that was not the market. That was manipulation. The manipulation could only last for so long. Now the market forces are taking over and driving the prices down again.
Then why am I still paying $2.79 a gallon in Washington state?
Wow, a lot of foreign economies that are based upon oil revenues are in for a serious world of hurt.
Indeed, that's why I say right now that we may be soon hitting bottom on pricing, because the current low price could cause Venezuela and/or Nigeria to stop exporting oil--and that will send the price of oil rising again because the two countries I mentioned are easily the largest oil producers outside of the Middle East.
Depends on whether you’re in TX, or not ;-)
19cents a gallon at the pumps?
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