Tags: oil | price | crude | brent

Oil Analysts Balk at Calling Floor as Crude Sinks Under $50

Wednesday, 07 Jan 2015 10:13 AM

Oil’s drop has been so rapid and so driven by sentiment that forecasters from Bank of America Corp. to UBS AG say there are no clear signs for when the rout will end.

Brent crude slumped below $50 a barrel Wednesday, 57 percent less than the peak of $115.71 reached in June. UBS analysts say investors should avoid oil until the “free fall” ends. Traders are ignoring supply disruptions that would normally boost prices, ABN Amro Bank NV analysts said.

“It’s pointless to speak about the point of reversal,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, wrote in an e-mail Jan. 5. “It’s unpredictable and fundamentally not identifiable,” with prices now driven by sentiment rather than supply and demand, he wrote.

Oil’s slump accelerated after the Organization of Petroleum Exporting Countries said Nov. 27 it would maintain production. The 12-nation group is seeking to protect market share rather than prices, challenging U.S. shale drillers and other rivals to pare their output instead.

“The price drop has been too fast and too far for the fundamentals,” Hans van Cleef, an energy economist at ABN Amro in Amsterdam, said by phone yesterday. “The market is only focusing on the negative. It’s very hard to see a trigger which could turn the sentiment.”

Glut Obsession

The market is “obsessed” with the perception of a supply glut and traders are ignoring disruptions such as those caused by fighting in Libya, Van Cleef said. A crude tanker was bombed there on Jan. 4 while storage tanks at its biggest oil port were blown up last month. Libya has Africa’s biggest oil reserves.

“Prices remain in a free fall,” Giovanni Staunovo, an analyst at UBS in Zurich, wrote in a report. “We think it is too early to call for a solid short-term price floor.”

There is no evidence yet that non-OPEC supply is contracting or that lower prices are spurring demand, both of which could halt the collapse, Miswin Mahesh, an analyst at Barclays Plc in London, said by phone.

There is a “growing risk” that Brent will fall to $40 and West Texas Intermediate, the U.S. benchmark, below $35, Francisco Blanch, head of commodities research at Bank of America in New York, wrote in a report.

Brent traded at $50.91 a barrel at 2:13 p.m. London time, having earlier dropped to $49.66. WTI was at $48.24 in New York.


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Oil's drop has been so rapid and so driven by sentiment that forecasters from Bank of America Corp. to UBS AG say there are no clear signs for when the rout will end.
oil, price, crude, brent
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2015-13-07
Wednesday, 07 Jan 2015 10:13 AM
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