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Speculators Dumping Oil Around The Globe

By:
Barry Norman
Published: Jun 17, 2016, 03:38 UTC

Crude oil continued to fall ignoring the lower US dollar. As traders ran to safety many sold off commodities ahead of next week’s UK referendum. WTI fell

Speculators Dumping Oil Around The Globe

Crude oil continued to fall ignoring the lower US dollar. As traders ran to safety many sold off commodities ahead of next week’s UK referendum. WTI fell to 46.47 down by $1.56 as speculators dumped their holding to book profits after last week’s climbs. Brent oil moved right along with WTI to reach 47.47. On Wednesday the Federal Reserve downgraded 2016 growth for the US and the Bank of Japan and the Bank of England followed along today. Lower growth signals lower demand while supply continues to rise as global producers pump and pump and pump more.  There is a growing chance that Britain might leave the European Union in the coming weeks. This situation has raised investors’ concerns over the outlook of the European Union and their devalued currency. This separation could have a huge impact on the global economies, currency exchange rates and on the riskier assets like oil and other commodities.

crude oil

Crude oil futures are completely in doldrums with several bearish reports. The recession in Europe, separation of Britain, slow demand from China and potential oil supplies are likely to put more pressure on crude oil prices in the coming days. Crude oil futures tumbled Thursday, extending this week’s significant retreat amid demand concerns and a global supply glut.

Global economic headwinds are blowing relatively hard just as supplies from Canada, Libya and Nigeria are coming back to market. Canadian Oil Sands operators are resuming operations after last month’s devastating wildfires near Ft. McMurray. Meanwhile, EIA data yesterday showed US oil inventories fell less than expected. U.S. crude supplies fell for a fourth week, capping the longest string of declines in a year. Stockpiles slipped by 933,000 barrels in the week ended June 10, short of median estimates for a 2.33 million-barrel decline, Energy Information Administration data showed Wednesday.

brent oil

As the Fed kept the interest rates unchanged in this week’s meeting, the focus has shifted to the Brexit vote. OPEC forecasted a more balanced crude oil market in the second half of 2016 in its monthly market assessment report released on Monday. However, the Market sentiment of at least a short-term topping-out in prices—and the Market’s negative reaction to the Fed’s statement—overshadowed the positive indicators.

oil inventory

In addition, recent poll results suggest that a Brexit is possible as the “leave” campaign is raising concerns over global economic health. A weaker global economy implies a lower demand for crude oil.

A note by Goldman Sachs weighed on sentiment in oil, with the Wall Street firm saying crude needs to stay within $45-$50 to ensure a supply deficit in the second half of 2016.

Robust demand and production disruptions have helped balance the oil market but this equilibrium will again tip into surplus early in 2017, the International Energy Agency (IEA) said on Tuesday.

There is plenty of oil flowing into the market with Iran’s exports on track to hit the highest in almost 4½ years in June, as shipments to Europe recover to near pre-sanctions level, a source with knowledge of the country’s crude lifting plans has told Reuters.

EIA-2

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