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Oil Plunge Takes Both Brent, U.S. Crude Below $40 

Commodities Sep 08, 2020 04:40PM ET
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© Reuters.

By Barani Krishnan

Investing.com - It never rains, but it pours.

The misfortune that began for oil longs two weeks ago hasn’t seem to have run its full course yet, as the resurgent dollar again provided the fuel for a selloff that took both the crude benchmarks below the key $40 support.

Adding to the bearish streak were worries that U.S. refinery runs could only be lower from here with the end of the peak summer driving season. More hurt came from the continuous tumble on Wall Street that took the Dow and S&P 500 down more than 2% each and Nasdaq by over 4%.

“We are dropping because we stopped rallying with the macro side of the market,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina. “The dollar is stronger and the S&P being weaker is only helping the oil markets fall.”

New York-traded West Texas Intermediate, the key indicator for U.S. crude, settled down $3.01, or 7.6%, at $36.76 per barrel. It earlier marked a session low of $36.13. WTI fell 7.5% last week for its sharpest weekly drop since June.

London-traded Brent crude, the global benchmark for oil, settled down $2.23, or 5.3%, at $39.78 per barrel after a session low at $39.31. Brent lost 5.6% last week.

The Dollar Index, which pits the greenback against six other major currencies and works as a contrarian trade to commodities, rose 0.8% to hit a near one-week high at 93.49.

Just two weeks ago, oil prices hit their highest since March in a slow but persistently rally that propelled WTI to $43.78 per barrel and Brent to $46.53.

But with Monday’s Labor Day holiday symbolically bringing to an end the peak U.S. summer driving season, a familiar old theme began to make its rounds on the market: there may be more oil supply than demand hereon.

Also weighing on oil was OPEC kingpin Saudi Arabia’s decision last week to cut the selling price of its crude, ostensibly to preserve or widen its market share. The Saudi move came just weeks after OPEC’s global producer alliance called OPEC+ said it would scale back on production cuts.  The rally of the Dollar Index and the stocks rout on Wall Street combined in a broad aversion of risk for investors.

Oil Plunge Takes Both Brent, U.S. Crude Below $40 
 

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Comments (6)
Mein Ki
Mein Ki Sep 08, 2020 2:04PM ET
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_Bears_? Who are your customers? Is it a kindergarden group?
Barani Krishnan
Barani Krishnan Sep 08, 2020 2:04PM ET
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Mein Ki, instead of wasting your energy on ineffective sarcasm against me -- and risk getting ridiculed by others here -- try and get a better read on the market the next time.
BOB MM
BOB MM Sep 08, 2020 2:04PM ET
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Barani Krishnan   So what's your opinion about the current price?
Alan Rice
Alan Rice Sep 08, 2020 1:25PM ET
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$5 oil again ??(Road trip !!)
znao sam
znao sam Sep 08, 2020 1:16PM ET
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bear,bulls hahahaha ....There is just banks and hedge funds
Barani Krishnan
Barani Krishnan Sep 08, 2020 1:16PM ET
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Yes, but there are clear lines on how they are identified based on their positioning. It amuses me to no end to see LOSERS use defense mechanism like this to couch their hurt/anger with the market.
Christian Breihof
TradersDay Sep 08, 2020 1:16PM ET
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Barani Krishnan how are banks and hedgefunds identified at the chart?? I would be thankful if you reveal their market manipulation
Plopseven Schwartz
Plopseven Schwartz Sep 08, 2020 1:01PM ET
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Oil will go negative again. This is a demand-side decline.
David Bennett
David Bennett Sep 08, 2020 12:00PM ET
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last gasp for the bear market, but plenty of room for market manipulation. last month to keep the rigs on the ground. welcome the decine curve.
David Bennett
David Bennett Sep 08, 2020 12:00PM ET
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decline
Deepak Joshi
Deepak Joshi Sep 08, 2020 11:19AM ET
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lets see what next and wait till Thursday.
 
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