Oil Continues Downward Trend Due to High Supply

West Texas Intermediate crude traded near the lowest level in more than two years as rising U.S. production increased supplies. Brent was little changed.

Both grades have collapsed into a bear market as shale supplies boost U.S. output to the most in almost 30 years and global demand growth weakens. The largest OPEC producers are responding by cutting prices, sparking speculation that they will compete for market share rather than reduce supply.

“The supply boom is ongoing,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Nobody sees any reason to buy so people just keep selling off. The Saudis will have to cut production to stabilize the price.”

WTI for November delivery fell 4 cents to $81.80 a barrel at 11:55 a.m. on the New York Mercantile Exchange after touching $80.01, the lowest level since June 29, 2012. Prices are down 24 percent from June’s high of $107.26. The volume of all futures traded was more than double the 100-day average.

Brent for November settlement declined 19 cents to $84.85 a barrel on the London-based ICE Futures Europe exchange after reaching $83.37, the lowest intraday price since November 2010. Volume was 56 percent above the 100-day average for the time of day. Prices have decreased 27 percent from the June high. WTI traded at a $3.05 discount to Brent on the ICE.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza