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Crude oil prices hit new annual lows early Friday, compounding the carnage of a commodity that already has a future for the US benchmark and the international bear market.
Brent World Benchmark
LCOF9, -5.88%
and WTI are in a bear market, usually defined as a drop of at least 20% from a recent high.
Here are some of the reasons that industry experts believe contributed to Friday's tumble, which led to the formation of crude West Texas Intermediate crude.
US: CLZ8
on the verge of slipping below $ 50 per barrel, a drop of about 7%, and getting close to the lowest settlement since October 2017:
- . Volume of holiday transactions: Traders say Friday's drop can at least partly be attributed to the contraction in trading volumes after Thanksgiving, when commodity markets were closed. A weaker commercial activity can exacerbate the movements of an asset and, with the crude engulfed in a vicious downtrend, the trend is trending down. In addition, the crude oil market will close an hour earlier at 13:30. Is.
- . Excess supplyAccording to the Energy Information Administration, oil production in the United States exceeded 11 million barrels a day earlier this year, raising fears that supplies will overwhelm demand.
- . Margin Calls: Traders say Friday's pullback was also intensified by hedge fund margin calls and speculation on oil prices. A margin call occurs when a broker asks a customer who has lost money by making leveraged bets to raise additional money in order to meet a margin. minimum maintenance. Margin calls can lead to forced sales, amplifying upward and downward movements.
- . Request from ChinaChina's demand for petroleum byproducts, petrol, dropped to its lowest level in 13 months, according to a Reuters report released on Friday, again stating that the trade dispute between Beijing and Washington night to the world's second largest economy and to one of the largest importers of energy-related products.
- . Asset: President Donald Trump has always pleaded for lower oil prices Wednesday issued an exhorting tweet prices even lower and thanking the Saudis for recent declines.
- . Saudi Arabia in a corner: Market players have said that the assassination of journalist Jamal Khashoggi, orchestrated by Saudi Arabia, has complicated politics around oil. Trump is reluctant to sanction Riyadh because of his desire to keep fuel prices down and preserve defense sector agreements. The oil-producing nation may feel compelled to comply with the US president's desire to lower crude prices.
Low oil prices have disrupted investors and created new uncertainties about global economic health. The S & P 500 index reflects ongoing concerns about expansion outside the United States.
SPX, -0.20%
the Dow Jones Industrial Average
DJIA, -0.24%
and the Nasdaq composite index
COMP + 0.03%
all headed for their worst Thanksgiving week in years.
"Concerns about slowing global demand and a possible slowdown in China" have made investors fear that oil is a worrying sign for global markets, said Phil Flynn, Senior Market Analyst at Price Futures Group. "The bottom is really short of oil," said Flynn.
Tariq Zahir, managing director of investment advisory firm Tyche Capital Advisors, said he thought margin calls were increasing the downward trend in oil prices and that he speculated that the market could see a settlement less than $ 50 per barrel. "I really think that 50 dollars will be broken," he told MarketWatch.
Zahir also said that Saudi Arabia, considered the most influential member of the Organization of Petroleum Exporting Countries, was not able to drive up oil prices because of the policy surrounding Khashoggi's murder.
"I think the Saudis are really in a corner," he said. OPEC will convene a key meeting on December 6, which will be closely followed by the plan to address the dramatic price deterioration that has occurred.
Market participants think the meeting can not happen soon enough.
Check out MarketWatch's explanation of how oil has gone from a peak of 52 weeks to a bear market.
Lily: Here is what the US waivers on Iran's oil sanctions mean for the global crude market
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