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OPEC Quiet As Oil Prices Tumble Below $39

By:
Barry Norman
Updated: Aug 25, 2015, 14:24 UTC

Oil prices remain the talk of the markets on Monday and Tuesday even though there was a global rout in commodities, currencies and equities the depth of

OPEC Quiet As Oil Prices Tumble Below $39
OPEC Quiet As Oil Prices Tumble Below $39
OPEC Quiet As Oil Prices Tumble Below $39

Oil prices remain the talk of the markets on Monday and Tuesday even though there was a global rout in commodities, currencies and equities the depth of the fall of oil shocked investors. The bull cycle in commodities ended months ago, and prices for metals such as copper, iron ore and aluminum have slipped by double-digit amounts. Some of that is due to the drop in crude oil prices, because lower demand for energy typically indicates that the demand for base metals will soon follow suit as reported by 24/7. WTI crude oil traded at less than $39 a barrel, after posting a new 52-week low of $37.75 shortly after the opening bell Monday. Brent crude traded at around $43.40, after posting a new 52-week low of $42.51 in the morning. Brent has not traded at this level in more than six years.

Crude oil remained below the $39 level gaining 65 cents in the Tuesday morning session to trade at 38.89 while Brent oil gained 82 cents to 43.35.

“The petroleum markets are extending last week’s decline along with global equity markets on Monday as worries over slowing Chinese economic growth intensified,” said Tim Evans, energy markets strategist at Citi Futures.

Financial markets endured one of their worst days since the 2008 financial crisis, starting with a rout in Asian bourses on mounting fears that China’s slowing economy will drag down the global economy with it. European and US stocks joined the sharp sell-off, and commodities were hammered.

The issue of an economic slowdown in China, the world’s second-largest economy and crude-oil consumer, is at the heart of the matter as far as demand for oil and other commodities.

oil sell off chart

Bart Melek, head of commodity strategy at TD Securities, said the oil market was getting clobbered from two sides: The outlook for demand was weakened by China’s woes and there was no sign of easing in the global oversupply.

“We continue to be worried about new Iranian supplies, US drilling activity increasing, maintenance season coming up for refineries… that basically prompts people to think the oil market is going to be oversupplied for longer,” said Melek.

Asian stocks resumed their slides on Tuesday, with China’s and Japan’s major stock indexes tanking again in early trade, sparking fears of a hard landing for the Chinese economy, the world’s most important growth engine.

Crude oil markets reacted cautiously in early trading, edging up but remaining at levels comparable to the peak of the global financial crisis in 2009, suggesting that worries over the economic outlook in China, the world’s second-largest oil consumer, are now at least equally as big as previous concerns of oversupply that has plagued the market for over a year.

U.S. crude is now almost 17 percent below its opening price at the start of the month and Brent is down more than 10 percent. Multi-year lows in oil prices have so far failed to trigger any action from the world’s biggest producers to rein in output. Output from the Organization of the Petroleum Exporting Countries (OPEC) has hit records in a bid to squeeze out competition especially from U.S. shale producers. But they have so far been resilient to the resulting price plunges and kept pumping oil.

crude oil prices mon

 

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