Investing.com – Forget OPEC, just look at the .
That could be the best advice to investors in crude oil these days, particularly amid the thin, holiday trading conditions that prompt West Texas Intermediate crude to U.K. Brent and RBOB gasoline to follow Wall Street’s main indices rather than any energy-specific fundamentals.
WTI was down almost 4% on Thursday as the Dow shedded more than 300 of its 1,000-point rally from the previous session that boosted the U.S. crude market by more than 8%.
was down $1.77, or 3.8%, to $44.84 per barrel by 11:14 AM ET (16:14 GMT), after Wednesday’s gain of $3.69 or 8.7%. With just two other sessions left to 2018, WTI is down 25% on the year and is off 42% from four-year highs of nearly $77 a barrel hit in early October.
was down $1.99, or 3.6%, at $53.30 per barrel. Brent remains down 20% on the year and is off 39% from four-year highs of nearly $87 a barrel hit in early October.
“Whether we break below $40 on crude or head back towards $50 is going to depend very much in the near term on how the stock market behaves,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Conn. “Until all market participants are back to work next Wednesday, the production cuts OPEC has vowed to do won’t matter.”
Phil Flynn, senior analyst for energy at The Price Futures Group brokerage in Chicago, concurred, saying, “(oil is) basically out of touch with any real supply-demand fundamentals and instead seems to be swung by the headline of the moment or whether stocks are going to skyrocket or plunge on any given moment.”
“The ramifications of these recent crazy moves will no doubt cost us barrels in the New Year,” added Flynn, who typically has a bullish outlook on oil.
Faced with oversupplies from record high U.S., Saudi and Russian production, OPEC pledged on Dec. 7 to cut 1.2 million barrels per day in global oil output over the next six months under its enlarged OPEC+ pact that does not include the United States.
But in the three weeks since that announcement, oil prices have only fallen further, hitting 18-month lows, as fears of a global economic slowdown and the possibility of a protracted U.S. government shutdown added to concerns.
Russian Energy Minister Alexander Novak said on Thursday the country will cut between 3 and 5 million tonnes of supply in the first half of 2019 as part of the deal, Reuters reported. Moscow will then be able to restore supply to 556 million tonnes (11.12 million barrels per day) for the rest of 2019, on par with 2018, he added.
Iran, which faces U.S. sanctions on its oil exports, meanwhile, said private exporters had “no problems” selling its oil, offsetting any positive impact from the talk of reduced supplies by the Saudis and Russians. Although an OPEC member, Iran has been exempted from participating in the cartel’s impending production cuts.
The market will be on the lookout on Friday for the U.S. government’s weekly data on , which analysts expect to show a decline of 2.7 million barrels. The American Petroleum Institute, a trade group, will issue a snapshot at 4:30 PM ET (21:40 GMT) on Thursday on what the EIA numbers could be.
Source: Investing.com
