US Crude Falls Under $50/bbl, Analysts See it Heading Lower

Brent crude Thursday fell 1.09 percent to $52.09

Supporting one respected analyst's prediction earlier this week that oil was headed for $42, oil prices continue yesterday's downward momentum and slid 2 percent on Thursday, with West Texas Intermediate settling at $49.28, its lowest closing level since November; Brent crude fell 1.09 percent to $52.09.

This follows a dismal Wednesday in which prices plummeted 5 percent, with Brent posting its biggest downward daily price move of 2017 at a drop of $2.81.

Tamas Varga, analyst at PVM Oil Associates, said, "The risk is now tilted to the downside; lower numbers are not a foregone conclusion yet, but bears are in control."

Phil Flynn, analyst at Price Futures Group, noted that "It was one month ago yesterday that the market got hit on a big increase in supply only to (have prices) rebound and start making new highs a few days later.

"The problem is this time, after an extended sideways period, a confirmation of a breakdown would suggest that this market will need some major news to get us back on that long term bullish track."

In what may be the understatement of the month, Adam Sieminski, a scholar at the Center for Strategic and International Studies and former head of the Energy Information Administration, told Bloomberg, "People are nervous about the global supply-demand balance; shale is coming back with $50 oil and there's uncertainty about whether OPEC and its partners are going to roll over the production agreement."

To which Kyle Cooper, director of research with IAF Advisors, added, "If we settle below $50 tomorrow there's a good chance that we'll come in Monday to see some liquidation."

Even though anything could happen in a market as currently volatile as oil, the downward trend this week lends credence to an earlier prediction made by John Kilduff, founding partner of Again Capital, that WTI is heading towards $42 per barrel.

He told CNBC that traders have "thrown in the towel and we're in the process of a pretty big long liquidation at the moment that should carry us all the way down, I think, to the November lows of $42," adding that the level could be reached by the end of April - after which it could dip below $40.

This grim forecast is shared by Bruno Stanziale, director of commodity strategy for Eurasia Group; he told Bloomberg that because the Organization of the Petroleum Exporting Countries (OPEC) is "likely not to to re-up the cuts at the end of May" the market will see continued downsides.

Earlier this month, Gene McGillian, manager of market research at Tradition Energy, said, "Without full compliance by the OPEC cartel and non-OPEC producers, and signs that demand is picking up, we are positioned for a correction."

He added, "There's a risk that some of the new longs will start to head for the exits, and that's where we could see a correction."