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Oil Down 8%; $50 Support for WTI in Jeopardy

CommoditiesNov 23, 2018 02:30PM ET
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© Reuters.

By Barani Krishnan

Investing.com - The bull trap was set even before the turkey was laid out.

The thin post-Thanksgiving holiday volume provided the perfect market condition for oil bears to lure in longs and hammer prices down 8% after the dead-cat bounce of 2% Wednesday. Oil bears also came precariously close on Friday to their long-time target: breaking the $50 support for West Texas Intermediate. They could achieve that as early as next week, barring a flip in sentiment. The $60 support for Brent, meanwhile, was shattered.

WTI Poised For Biggest Monthly Loss Since 2008

U.S. WTI settled down $4.21, or 7.7%, at $50.42 per barrel after hitting a 13-month low of $50.16, just cents away from breaking the $50 support.

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. But it has now lost 35% from a four-year high of nearly $77 hit in October and is poised to end November down 23%, the biggest monthly loss since October 2008.

U.K. Brent, the global benchmark for oil, fell $3.38, or 5.4%, to $59.22 per barrel by 2:24 PM ET (19:24 GMT), breaking below its $60 support the first time since July 2017. Brent rose 1.2% on Wednesday. But it is now down 32% from a four-year high of nearly $87 reached in October.

Helping the sinking sentiment, of course, was the notion that President Donald Trump would successfully prevent OPEC from slashing production when the cartel 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:NXGN) 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.

Oil Down 8%; $50 Support for WTI in Jeopardy
 

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Kevin smarte
Kevin smarte Nov 23, 2018 6:45PM ET
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paid 2.10 today..tks trump
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michael hammer
michael hammer Nov 23, 2018 5:52PM ET
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Not the first time Saudis have killed journalists. Why does everyone suddenly care? Is it to beat Trump over the head with it? Is it to force sanctions on SA to drive up oil and thus giving a chance to renewable? Or simply because he was a liberal reporter this time?
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Thomas Hutton
Thomas Hutton Nov 23, 2018 4:15PM ET
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The Flip sife to this remark is the oil patch will loose jobs and all those people who have investments in the energy segment just got hammered.Also Saudi will have a ton of losses and won't be able to buy arms and weapons with oil at these prices.
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Sam Tortumlu
Sam Tortumlu Nov 23, 2018 3:35PM ET
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Biggest expierter of oil pushing for lower oil prices , not an economical but purely political reasons.
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David Wilder
David Wilder Nov 23, 2018 11:44AM ET
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How much is one man's life worth?
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Kaz Godzwon
Kaz Godzwon Nov 23, 2018 11:44AM ET
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I would rather say ask president Trump.
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Joe Thuo
Joe Thuo Nov 23, 2018 11:44AM ET
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according to Trump, just a barrel of Brent oil
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Johann W.
Johann W. Nov 23, 2018 11:44AM ET
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Depends on the man.
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Vorlon Firstone
Vorlon Firstone Nov 23, 2018 11:44AM ET
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The guy was a Saudi citizen, why would Trump care about Saudi *****Saudi?
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Thomas Hutton
Thomas Hutton Nov 23, 2018 11:44AM ET
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There is know price for a life.
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