Oil plunges into the bear market

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US oil prices fell 3.4 percent to 51.68 dollars a barrel on Wednesday after a government report showed a sudden and unexpected upsurge in oil inventories. That leaves crude down 22% from its April 23rd high of $ 66.30.

"There was nothing you could say that is bullish," said Ryan Fitzmaurice, energy strategist at Rabobank.

US oil stocks rose 6.8 million barrels last week, the US Energy Information Administration announced on Wednesday. Inventories are now placed 6% above their five year average for this time of year.

Shipments of petroleum products such as gasoline also increased. In fact, the construction of 22.4 million barrels of oil and products represents the largest increase since the start of weekly data in February 1990, according to ClipperData.

Michael Loewen, an analyst at Scotia Capital, wrote in a note to the client on Wednesday.

The price of American oil began to fall last month as fears of a trade war swept Wall Street. Growing trade tensions with China and Mexico threaten to slow down the global economy and curb the demand for oil and other commodities.

Interestingly, US oil prices continued to decline in the past two days as the stock market soared.

"A weak macroeconomic backdrop has triggered oil sales, and now oil downtrends are being released as stocks go back up," said Fitzmaurice.

Oil prices plummeted in a bear market in November, with worries about an oversupply of supply and a slowdown dissipating. This sale of oil announced a strong pain in the stock market.

Crude and the stock market rebounded early in 2019 as fears of a recession eased and OPEC slowed production. Oil has also been boosted by US sanctions against Venezuela and Iran.

Fitzmaurice said the spectacular movements – upward and downward – of oil prices highlight the role of computerized trading based on the dynamics of the oil market.

"Algorithms are very quickly profitable in extreme scenarios, which is why we are seeing sharp fluctuations," he said.

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