Americas News
US Crude Prices Drop to 7-Week Low as Goldman Stresses That Fundamentals Still "Very Much Intact"
Friday ended on another sour note for crude, with with West Texas Intermediate plunging to a seven week low of $58.07 per barrel before recovering slightly to end the session at $59.20, a drop of $1.95.
Brent fell $1.66 to $63.15 after hitting a nine-week low of $61.77 per barrel.
The reason for the losses were the same as for earlier in the week - unprecedented U.S. oil and infrastructure growth - only delivered by a different messenger: WTI broke below $59 after Baker Hughes reported that the U.S. oil rig count rose by 26 rigs to 791, the highest total since April 2015.
Along with the price drops comes pain for oil and gas companies: Bloomberg reported that Exxon Mobil Corp. has lost about 16 percent over six sessions, erasing $61 billion of market value.
Meanwhile, CNBC host Jackie DeAngelis also cited the rising dollar index for Friday's dismal market performance as well as the possibility "OPEC just may not have any jaw-boning tricks left."
Indeed, with Americans pumping all out and stockpiles on the rise, all eyes are now shifting to the Organization of the Petroleum Exporting Countries with the fear that its production cutback strategy, now in its second year, could be abandoned.
In fact, Alexander Dyukov, CEO of Russian energy giant Gazprom, on Friday said producers could adjust their commitments under the deal as soon as next quarter and hoped they would agree to raise output on the premise the market is now balanced: "It goes to the sense that folks are getting antsy about the production scheme holding together."
John Kilduff, founding partner at Again Capital, stressed that crude's losses this week are not solely the outcome of oil-related factors.
He pointed out that the Dow Jones industrial average and the S&P 500 is now trading in negative territory for the year: "The correlation with the S&P 500 has picked up, so to the extent it's been going down, we've been going down too."
In a bid to quell panic, Jeffrey Currie, global head of commodities research at Goldman Sachs, told Bloomberg television that oil fundamentals are "very much" intact and reminded everyone that "oil had three of these big corrections last year."
But there's no denying that even more trouble seems to be on the horizon due to U.S. shale: "We think that surging supply and slowing demand growth will tip the market back into a surplus this year," analysts at Capital Economics said in a note.
Earlier this week, Kilduff forecast that with the dollar index back over 90, crude prices will fall back down to the mid-$50s "fairly rapidly."
