Oil Decline Is Worrying Investors, Again

Oil Decline Is Worrying Investors, Again


Oil prices plummeted Monday along with the stock markets thanks to fears for demand next year, in an increasingly fragile global economic situation. The February WTI futures contract plunged 6.7% to $42.53 a barrel, returning to 18-month low last hit in June 2017. The North Sea Brent price, lost 6.2% at $50.50 per barrel. WTI has plummeted 29% since the beginning of the year, and 44% from its annual highs in early October to more than $76.

Fears for growth and stock market plunge

This big drop has occurred against the backdrop of fears of an excess supply next year, fears that have been rising in recent weeks by signs of a slowdown in the world economy, particularly in China and the United States. The stock market turbulence of recent weeks, with a plunge of more than 10% of major US indices since early December, contributed to widespread risk aversion. The Dow Jones index has lost 14.6% since the beginning of the month, the S & P 500 fell 14.8% and the Nasdaq dropped 15.5%.

The only notable macroeconomic indicator released on Monday, the Chicago Fed’s national activity index for November 2018 came out above market expectations, at 0.22 against a consensus of 0.19.

OPEC confident in the effects of production declines

On Sunday OPEC officials estimated that supply and demand would be in equilibrium early 2019, but they clearly fail to convince the markets. Several ministers of OPEC countries, gathered Sunday in Kuwait, estimated that the expected decline in production, following the so-called Opec + agreement, would stop the decline in oil prices.

Under the agreement, OPEC member and non-member producers agreed earlier this month to reduce production by 1.2 million barrels per day from 1 January to support prices. Analysts on average expect the price of Brent to hit $69 per barrel next year, down sharply from the $77 estimated a month earlier.

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I am an independent trader currency and commodity with about eight years of experience. I love the financial world because it is like one big puzzle and I hope we help each other out to solve the puzzle to help us realize our dreams. I received my BBA in Accounting (With Honors) - from The University of Texas - San Antonio. Achievements: Beta Alpha Psi National Accounting Honors Fraternity member, Leadership Challenge Participant, Dean's List. I have passed the Series 63, 22, Texas Real Estate exam, and the DRI Business Continuity exam.