U.S. oil prices fell 7% on Tuesday to $ 36.76 a barrel. It was the worst day of the raw and the lowest closing price in almost three months. At one stage, the oil was reduced to 9%. World benchmark Brent crude fell below $ 40 a barrel for the first time since late June.
“Demand has fallen, supply has increased,” said Robert Yower, director of energy futures at Mizuho Securities. “The economic laws of survival are being violated at both ends of the spectrum.”
“It’s a double-flashing warning sign,” Yaver said. “OPEC is kind of panicking today by giving a bad signal to the energy community.”
‘Sudden sale orders’
The latest turmoil in the oil market has been a major upheaval in the stock market.
“Oil gets caught up in risk-off trade,” said Jeff Will, an energy analyst at Newberger Berman. He said that “nothing has changed” in the basic supply / demand film for oil.
Just as investors are touching the exits on tech stocks, they are unleashing ula hajj bets on crude oil.
“Everyone is trying to get out at once. There is an avalanche of sales orders,” Mizuho’s Yaver said.
Investors are also coming out of oil reserves.
Weak air travel discourages demand
The pandemic, along with the price war between Russia and Saudi Arabia, has caused oil prices to rise this spring. U.S. oil prices turned negative for the first time, reaching $ 40 a barrel.
The good news for oil bulls is that demand for gasoline has grown significantly.
Road traffic has almost recovered and Bank of America expects global oil demand to be positive for the year from road use in the next few months. This helped raise the national average gasoline price to $ 2.22 per gall, which rose to a low of 77 1.77 at the end of April.
That’s why Bank of America warned in a report late last week that it would take three years for global oil demand to “normalize”.
“Global oil demand has really slowed down. All of the low hanging fruits from global oil recovery have already occurred,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets.
When is the raw bottom?
Tran warned that fundamentals in the oil market would “continue to weaken through the fall”.
So how low can the knot go?
Yavertes insists the crude will not be less than $ 30 a barrel, because at that point OPEC will come to the rescue again.
“I don’t think we’re going to go into the abyss again like in spring,” he said.
About The Author
More Stories
How List Acquisition Helps Your Political Campaign Become Successful
Four escaped cows were caught
A simple administrative decision? | Press