Americas News
Friday Oil Prices Plunge Another 7%, Now Down 30% in 7 Weeks
Not even the proposed Organization of the Petroleum Exporting Countries (OPEC) cutbacks, which recently lent some support to crude prices, could prevent yet another substantial slide on Friday, this time by more than 7 percent, down more than 30 percent in total in 7 weeks.
West Texas Intermediate settled down $4.21, or 7.7 percent, to $50.42 per barrel, while Brent dropped $3.66, or 5.9 percent, to $58.94.
WTI has now lost 34 percent of its value from its peak on October 3 to Friday, and Brent has fallen as much as 32 percent, and this caused Andrew Lipow, president of Lipow Oil Associates, to remark, "I have to say that the speed in which the oil market has declined has surprised me even as OPEC and non-OPEC members discuss a production cut.
"The market does not think it will be enough."
Interestingly, the downward price plunge of Friday - and of the week in general - comes despite news that Iran's oil exports have dropped by several hundred thousand barrels per day (bpd) this month, according to Petro-Logistics.
The prospect of Iran's export losses under the U.S. sanctions has not only been a driver of high prices in recent months but also a source of near-hysteria from an analytical community convinced that the crude industry was headed toward a global supply tightening.
Tamas Varga, senior analyst at PVM Oil Associates, said in a research note, "The question is … how much longer [are] bears are able to keep firing: are they going to run out of ammunition shortly or they have ample supply of bullets?"
Vargas went on to note, "It is reasonable to compare the current economic and supply/demand picture with the one four years ago: after all, it was in November and December 2014 when oil prices fell more or less to the same level where they are now."
Morgan Stanley indicated that the OPEC supply cuts aren't a done deal by stating in a research note that the chance of them happening are around "2-in-3: in that scenario, Brent prices likely recover back into the $70s …on the other hand, in the 1-in-3 probability that OPEC does not come to an agreement, there is still downside to Brent prices, although probably not much below the high-$50s in the next few months."
Scott Wren, a strategist for Wells Fargo, chose to look at Friday's market performance optimistically by telling CNBC that crude prices are finally approaching a bottom: "From our perspective oil, while it's hard to say right now exactly where the bottom is going to be, we feel it's pretty close to where we are right now."
However, while he pointed out that "growth is decent here in the U.S., clearly the market is afraid and [oil is] adding to fears already that the global economy is going to be slowing down."
Earlier this week a Platts survey of companies including Barclays, Societe General, and Morgan Stanley suggested that the analytical community is surprisingly cool-headed about the fate of the crude market in 2019, with Michael Wittner, global head of oil market research at Societe General, going so far as to say there is "little evidence" of demand weakness developing.
