Sentiment is great in most markets right now but oil is certainly an exception. WTI crude oil fell again today, dropping $1.03 to $73.04.
The November low was $72.16 and it’s not hard to find discouraged energy market participants talking about oil prices starting with a $6.
The bigger worry underpinning that is a fear that OPEC has reached its limits and if US production growth outpaces demand in Q1, then a war for market share could unfold. The next catalyst might be US E&P budgets and guidance around production growth. If capex remains high, then it could get ugly.
On the upside, the seasonals begin to improve for oil around now and OPEC is going to take some barrels out of the market. Early estimates to US weekly oil supply data are showing a 12 million barrel draw, which could help turn the market. Last week was the sixth straight weekly decline, so buyers certainly wouldn’t be chasing the top.
This article was written by Adam Button at www.forexlive.com.