Investing.com – The bull trap was set before the turkey was served.
The thin post-Thanksgiving holiday volume is providing oil bears the perfect market condition to hammer prices down 6% after the dead-cat bounce of more than 2% Wednesday. Oil bears now seem to be in the final stretch of getting what they’ve wanted for over a month: break the $50 support for West Texas Intermediate. The $60 support for Brent has been shattered.
U.S. was down $3.66, or 6.7%, at $50.97 per barrel by 9:45 AM ET (14:45 GMT) after tumbling as much as 7% earlier to a 13-month bottom of $50.62. WTI settled up 2.2%on Wednesday despite data showing a ninth-weekly (and outsized) build in U.S. crude stockpiles, giving some traders the sense that a bull trap was being set.
U.K., the global benchmark for oil, fell $3.57, or 5.7%, to $59.03, breaking below its $60 support the first time since July 2017. Brent rose 1.2% on Wednesday.
Helping the sinking sentiment, of course, is the notion that President Donald Trump will successfully prevent OPEC from slashing production when it meets in Vienna on Dec. 6, by using his “no-sanctions trump card” for Saudi Arabia, which has admitted a premeditated murder of journalist Jamal Khashoggi, but denies any involvement by Crown Prince Mohammed bin Salman.
“The Saudi’s are talking with a much softer tone on oil prices and adding to the theory that the U.S. has been able to strike a deal to be lenient on them after the Khashoggi killing if they agree to keep prices lower,” said Scott Shelton, energy broker at ICAP (LON:) in Durham, N.C. “I must admit that I thought that this concept was just plain silly, and more likely to be in an episode of ‘Homeland’ on Showtime, but the concept continues to gain strength in the market as the market apparently requires a large cut in production.”
On Wednesday Trump tweeted: “Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!”
Reuters oil markets’ columnist John Kemp said the Saudis and OPEC seem to have pushed into a corner by the president to do his bidding.
“Trump has in effect agreed to overlook the killing of journalist Jamal Khashoggi in return for Saudi Arabia’s help to contain oil prices and for its assistance in other areas,” Kemp wrote in a commentary on Thursday. “The United States and Britain have seized on the vulnerability of the kingdom and its de facto ruler Crown Prince Mohamed bin Salman to push harder for a partial ceasefire in Yemen and improve relations with Qatar.”
“The kingdom will also come under heightened pressure to deliver on promises of increased arms purchases and overseas investment as well as reconstruction aid in Yemen,” Kemp added.
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Source: Investing.com
