However, one expert thinks the market has overreacted: File Image/Pixabay
Crude traders already spooked by the potential impact of an escalating trade war between the U.S. and China were further unsettled Wednesday by Beijing media stating that the country is ready to use its dominant position in rare earths (used in everything from consumer electronics to military equipment) to retaliate against the Americans.
Crude on Wednesday was also negatively impacted by Wall Street's main indexes hitting more than two-month lows, with investors dumping risk assets and seeking safety in Germany and U.S. government debt.
As a result, two key benchmarks were poised for another monthly decline: Brent ended Wednesday's session at $69.45 per barrel, down 66 cents, while West Texas Intermediate fell 33 cents to settle at $58.81 per barrel.
Scott Bauer, CEO, The Prosper Trading Academy
I think we've had an overreaction
However, as earlier predicted, the reopening of the Ozark pipeline from Cushing to Illinois provided some support, as did the Organization of the Petroleum Exporting Countries' (OPEC) ongoing output cuts, which assuaged persistent fears - however erroneous - that geopolitical tensions will cause a decline in international demand for oil.
Scott Bauer, CEO of The Prosper Trading Academy, acknowledged "there are a lot of headwinds" for the commodity, "But I think we've had an overreaction, and quite frankly I wouldn't be surprised to see ahead of the OPEC meeting oil push back above $60."
Bauer was referring to the cartel's scheduled meeting next month in which many experts believe that the output cuts will be extended for the remainder of 2019.
Bauer also stated that while demand is perhaps not as strong as it should be, "I think that's going to change: as we get closer to that OPEC meeting we're going to see tensions come off a little bit; the market doesn't like uncertainty....and that's really what's happening in oil right now."
Proving yet again that it is near impossible to follow a consistent chain of thought in the crude analytical community, Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Wednesday that "with Libya lurching from one crisis to another, conditions are increasingly ripe for a supply shock."
This sentiment directly conflicts experts who are convinced OPEC must extend its cuts because the world is swimming in too much oil, and it's also at odds with OPEC-surveyed secondary sources that said Libya's crude production actually increased by 71,000 barrels per day (bpd) to 1.176 million bpd in April.
Wednesday also saw its fair share of experts had a more even-handed view of the current market situation such as Fernando Valle, oil & gas analyst for Bloomberg Intelligence: he insinuated that perhaps too much attention is being paid to fluctuating prices by telling Bloomberg radio that the big oil companies can operate quite comfortably at a price range of between $45 and $50 per barrel.