Oil Roller-Coaster Ride Hits Another Drop



Oil Roller-Coaster Ride Hits Another Drop
Crude's rollercoaster ride pressed on with oil taking a turn lower along with US stocks.

(Bloomberg) -- Crude’s rollercoaster ride pressed on with oil taking a turn lower along with U.S. stocks.

Futures in New York fell 3.5 percent on Thursday. The S&P 500 dropped as much as 2.8 percent, making its way toward a bear market. Traders have been on edge this week amid giant swings in both equities and oil. On Monday, the U.S. benchmark crude fell more than 7 percent before jumping more than 10 percent on Wednesday.

“What’s going on with the overall economy and because GDP is so correlated with oil demand, that’s really what’s driving the bus lately,” said Stewart Glickman, an energy equity analyst at CFRA Research. “Are we driving into a recession or are things going to stabilize and be a somewhat steady state?”

U.S. benchmark crude is on track for the largest quarterly decline since 2014 amid fears that the ongoing trade war between the U.S. and China will hit demand. At the same time, some investors doubt that the Organization of Petroleum Exporting Countries’ deal to limit output with its allies will help tighten supplies. Producers aim to publish a statement in January on the implementation of the agreement, Russia’s Energy Minister Alexander Novak said.

West Texas Intermediate crude for February delivery dropped $1.61 to settle at $44.61 a barrel on the New York Mercantile Exchange. Total volume traded on Thursday was about 16 percent below the 100-day average.

A measure of oil market volatility jumped to the highest level in more than a month.

Brent for February settlement slid $2.31 to end the session at $52.16 a barrel on London’s ICE Futures Europe exchange. The global benchmark crude traded at a $7.55 premium to WTI.

Meanwhile, U.S. crude inventories probably fell 3.25 million barrels last week, according to a Bloomberg survey of analysts. If Energy Information Administration data due Friday shows a similar move, it will be the fourth consecutive weekly decline in U.S. crude stockpiles.

It’s “risk-off” right now with oil and equities moving in the same direction, said Tariq Zahir, a commodity fund manager at Tyche Capital Advisors LLC. If we don’t see a large draw in U.S. crude stockpiles and equities continue to decline, it’s likely crude will drop to $40 a barrel in the near-term he said.

Other oil-market news: Gasoline futures fell 2 percent to settle at $1.3040 a gallon. Crude’s recent  sell-off is a grim reminder that OPEC’s management of the oil market isn’t foolproof. The group’s Dec. 7 decision to curb output among members and allied producers was supposed to prop up sinking prices. Instead, it resulted in the worst post-cut price decline in a decade. Two top officials at Unipec, one of China’s most powerful trading companies, were suspended this week following losses on bets related to oil prices in the second half of the year, according to people with knowledge of the matter.

With assistance from Tsuyoshi Inajima and Grant Smith. To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Catherine Traywick, Will Wade.



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