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The 4.2% fall in US oil prices on Monday was the last sign that the dynamics that shaped the largest commodities market have changed since the start of the sharp rise
. oil exporting countries and its partners to reduce production; This year, investors are facing a series of factors likely to move the market: Trump administration sanctions that threaten to cut Iranian oil from the global supply; simmering trade tensions between the United States and China; OPEC's decision to increase crude production; and reduced production in Venezuela.
In addition, the President
Donald Trump
has made statements on oil, tweeting some days that prices are too high and that it is pressuring Saudi Arabia to increase its production. Last week, the Wall Street Journal reported that US authorities were planning to dive into the country 's emergency oil reserves to avoid another sharp price hike.
Monday morning, oil prices fell in anticipation of chief
Vladimir Poutine
. Prices have been steadily falling throughout the day, with some traders citing Russia's potential to increase production beyond what it agreed to do last month with OPEC. But others said that speculation did not justify such an extreme move. US crude closed at $ 68.06 a barrel, its lowest price in more than three weeks.
"What you have to face, it's a market that faces a lot of uncertainty"
Michael Hans,
Chief Investment Officer of Clarfeld Financial Advisors. "It's very difficult to have a clear idea of what the big producers are going to do."
Crude oil remains one of the best performing badets of the year after commercial threats have blurred other markets: US crude is up 13% However, the dolphins One day have become commonplace, a sign that if fundamental forces still support oil, investors are more likely to sell. even on days when stocks are not necessarily bearish.
US Brent does not manage to exceed $ 80
Monday's fall follows a 5% drop in US benchmark oil last Wednesday, its biggest single-day loss in addition to # 39, a year, which was largely triggered by investor nervousness over Libya's higher bid. That day, investors also ignored the bullish news: The US Energy Information Administration reported that crude inventories had fallen the most since September 2016.
"I was struggling to see why the move was so extreme"
Eric Armitage,
Chief Executive Officer of East Alpha, a quant trading company. "The news of Libya was worth 5 dollars [a barrel] I do not think so."
Meanwhile, commodities have also been overthrown by the escalating concerns of the trade war because some observers fear that a global economic downturn will reduce the demand for materials.
Many badysts and traders have said that the market has become more vulnerable to speculators and that algorithmic trading is accelerating downturns.
One day before the liquidation last Wednesday, bullish hedge funds and other speculative investors were outnumbered by the bear markets the highest ratio was year-round, data from Commodity Futures Trading Commission exposure.
"The market went far too far," said
Mark Wagoner,
President of Excel Futures. "Going out and taking profits is definitely the right thing to do."
The sale accelerated on Monday as US oil prices crashed across the 50-day moving average to about $ 69.50. Traders are now observing whether prices are testing the 100-day moving average of about $ 67.
"You have technical problems that are collapsing and you have fundamentals that are collapsing at the same time," Wagoner said, noting that demand typically runs between mid-July and September.
According to
Peter Hahn,
Co-founder of the research firm Bridgeton Research Group, the fundamental traders initiated the downward movement on Wednesday. But the opening declines prompted the trend algorithmic strategies to start selling.
Energy traders have said that algorithms tend to be the most active in the most liquid futures. They said the extreme moves in the first month contract on Wednesday were another sign of short-term fluctuations rather than a fundamental change.
Still, bullish investors say recent declines could be an opportunity to buy with US sanctions against Iran. fears potentially revive a supply crisis. The United States has threatened to penalize countries that do not reduce Iran 's oil imports to "zero" by Nov. 4.
"Supply problems have so much variability badociated with them," said
Thomas Martin,
Senior Portfolio Manager at Globalt Investments in Atlanta. "The oil market is acting today."
Write to Amrith Ramkumar at [email protected] and Stephanie Yang at [email protected]
