“When you start to worry about growth, you have crude oil down and it all ties together”.
Advertisement
Global equities tumbled on Thursday as investors feared for the global economy on signs of a dramatic slowdown in major crude consumer China.
After less than half an hour opening, stock markets of China were suspended, marking a second emergency suspension this week.
Until those “hefty” inventories begin to clear, oil prices will remain subdued, oil analyst Dominic Haywood from Energy Aspects told CNBC on Thursday, explaining the various factors adding to oil’s woes. “2016 is going to be very tough for them as the oil market is unlikely to balance out this year”.
The rapid slide has made a prediction by Goldman Sachs a year ago that oil could fall as low as 20 dollars a barrel less outlandish than it did at the time. Total volume traded was about twice the 100-day average.
Billionaire investor George Soros, speaking at an economic forum in Sri Lanka, drew similarities between the present environment and the financial crash of 2008.
“Markets are still heavily oversupplied, the weather is much warmer and there is pretty heft overhang in inventories and prices won’t be able to rise until that’s cleared”, he said.
Additionally, the global outrage over Saudi Arabia’s execution of a Shi’ite cleric ended speculation that Organization of Petroleum Exporting Countries could come together on a production cut, reports Simon Falush for Reuters.
USA oil futures in NY slid to the lowest in 12 years as turmoil in China’s markets pushes crude closer to $30 a barrel.
Meanwhile, U.S. crude futures also dropped more than 5 percent to a low of $32.10 per barrel, a level not seen since December 2003, but had since recovered to $33.13.
The global benchmark for Brent crude fell by as much as 5pc, or $2 a barrel to £32.16, the lowest since April (LSE: 0N69.L – news) 2004. It was down 1.6 percent at $33.70 at 1439 GMT.
“For sure, a minus 7 per cent for oil over two days on just China, and a blowup of the whole macro trade, was not something I was expecting to see in the first two days of the year”, said Doug King, fund manager in London for the $220 million Singapore-based Merchant Commodity Fund.
Brent crude dropped below US$35(S$50) a barrel to an 11-year low before weekly USA government data forecast to show fuel supplies rose in the world’s biggest consuming nation.
Advertisement
Prices trimmed early losses, with violence in the Middle East and north Africa offering a measure of support for the market.
