|12-13-2014, 12:08 PM||#1|
Oil selloff extends on IEA, down over 40 percent this year
Crude oil prices extended the drop under heavy selling pressures, extending WTI crude losses below $60 a barrel after the International Energy Agency (EIA) cut again its forecast for oil demand for the fourth time in five months.
Nothing seems to be offering a floor for oil prices as it continues to sell off, dragging US markets lower Friday as S&P heads for the biggest weekly decline in two months as concerns over global growth mount.
Brent oil futures dropped about 3.0% to $61.35 before recovering slightly during the session Friday, WTI futures also extended the drop to set the low of $57.34 a barrel Friday, down nearly 12% this week; year to date WTI futures are down about 40 percent.
In a report Friday the IEA forecasted weaken oil consumption in 2015 and continued expansion of oil supplies outside of OPEC will keep the downside pressure on oil. Supply is high and inventory build up will continue to pressure oil prices to the downside.
Oil has collapsed nearly 20% since OPEC decided to leave its production limit unchanged at 30 million barrels a day; with the ongoing selloff and the heavy negative impact on stock markets across oil producers and especially GCC, another emergency OPEC meeting is likely beginning of 2015 as oil risks reaching $50 a barrel.
GCC stock markets have been under heavy pressure especially after OPEC lowered its demand forecast for 2015. Saudi Arabia’s Tadawul benchmark index was the first to enter a break market on November 30 followed by Dubai’s DFM index on December 08 and were joined by the third last week by Oman’s MSM 30 index.
We will probably continue to see downside pressure in the coming sessions and expect more bearishness as GCC markets return from the weekend to reflect the impact of the IEA, trailing global markets.
The market will gradually begin to stabilize with the end of next week as holiday trading starts, slight correctional pullbacks are likely however lower volume will extend the volatility further.
Oil’s heavy sell off is only adding salt to injury as market jitters over the outlook for global growth piles.
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