Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Oil Prices Ravaged By Financial Turmoil

Commodities / Crude Oil Feb 07, 2018 - 02:36 PM GMT

By: OilPrice_Com

Commodities

Oil prices fell back suddenly over the last few trading sessions, dragged down by some forces beyond the oil market.

The steady decline of the U.S. dollar has helped drive up crude prices for weeks, but that came to an abrupt halt last week. A rebound for the greenback led to a steep decline in oil prices on Friday.

At the same time, sudden turmoil in the broader financial system also bled over into the oil market. Volatility in the stock market flared up on Friday, sparking the sharpest single-day upheaval in years.


The Dow Jones Industrial Average fell more than 600 points, only the ninth time in history that a fall of that magnitude has occurred. “The stock market and interest rates can really affect oil a lot,” Mark Waggoner, president of Excel Futures, told The Wall Street Journal. “It’s spilling over into the energy markets and causing these ripple effects.”

The stronger-than-expected job growth and wage increases fueled speculation that the Fed would tighten interest rates more than previously thought. Bond yields continue to rise, undercutting equities. Signs of higher inflation also led to speculation of interest rate hikes from the central bank. The dollar gained 0.7 percent on Friday.

That led to a selloff for Brent and WTI. And if the turmoil continues, the trouble for oil benchmarks will also linger. “The potential is present for a big move lower should fear return to the stock market and spark liquidations across the board,” analysts at TAC Energy said Friday, according to The Wall Street Journal. “The cross-asset class correlations have returned over the past several weeks.”

“The price slide is due to a general worsening of sentiment. Stock markets around the world are under pressure, which confirms that the steep price rise in the preceding weeks was for the most part sentiment-driven,” Commerzbank wrote in a note. “There is only limited fundamental justification for the high price level … It is therefore conceivable that the correction in oil prices will continue.”

An unraveling of positions from major investors could expose WTI and Brent to sudden losses. That correction tends to occur when a spate of news goes against existing sentiment. The broader financial system is finally facing some questions after a remarkable bull run, which is magnifying the danger for crude benchmark prices.

“A global selloff in risk assets is gathering pace and sending the energy complex lower amid a sea of red,” PVM Oil Associates Ltd. analysts Tamas Varga and Stephen Brennock wrote in a report. “The risk-off environment throughout the energy complex comes as U.S. drillers added oil rigs for a second consecutive week.”

“You’re starting to see a whiff of what I call the GMO trade — get me out,” Bill O’Grady, chief market strategist at Confluence Investment Management, told The Wall Street Journal.

It isn’t all sentiment trading, however. We now have several catalysts that could provoke a liquidation of bullish bets: inventories rose last week for the first time in months, the rig count continues to rise and U.S. production is breaking records. Seasonally, oil demand is at a lull, pushing up inventories. These trends were expected, but still present downside risk to what is looking like an overvalued oil price.

Perhaps most importantly, supply growth from the Permian looms large over oil prices. Ed Morse, global head of commodities research at Citigroup, told The Wall Street Journal that U.S. shale could wreck the oil market once again. He argues that the industry is ramping up production, and that assurances over a more cautious drilling approach from shale executives should not be trusted. As production increases continue unabated, oil prices could collapse again. “2018 could turn out to look a lot like 2014 — a year that started with very high prices and ended at very low prices,” he said.

Link to original article: https://oilprice.com/Energy/Oil-Prices/Oil-Prices-Ravaged-By-Financial-Turmoil.html

By Nick Cunningham of Oilprice.com

© 2018 Copyright OilPrice.com - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules