Tidal Wave Of Selling Knocked 5% Off Petroleum Contracts
If you like lower prices there’s plenty to be thankful for this week, after a tidal wave of selling Tuesday knocked more than 5% off of most petroleum contracts, pushing prices to their lowest levels of the year. Unfortunately for most with a 401K plan, that drop coincided with another large sell-off in US equities.
Reports that the US President planned to take it easy on Saudi Arabia over the killing of journalist Jamal Khashoggi (and noting the important role the kingdom plays in keeping oil prices in check) seemed to at least take fears of tension between 2 of the 3 largest oil producing nations off the table, and sparked speculation that there could be some quid-pro-quo on future supply decisions.
The big question: Did Tuesday’s melt-down mark the bottom for energy prices? Today’s good read from Seeking Alpha gives 3 reasons why that may be the case. 1. China will soon end its oil destocking that’s helped inflate global inventories. 2. OPEC is preparing to cut production. 3. Speculators are back to a neutral stance in energy contracts after weeks of mass liquidation.
For those looking for reasons why the selling may continue, look at the increasing oil output expected from Russia & the US on the supply side of the equation, and on the demand side, take a look at why the OECD thinks that growth in the global economy will slow next year.
CME/NYMEX futures will trade in abbreviated sessions both Thursday and Friday (no settlements Thursday) but physical spot market assessments won’t be made and most US companies will be closed, so most rack prices will hold steady through Monday.