Oil plunges below $50 threshold for first time since mid-December
Here we go again: Crude oil is once again in selloff mode with prices sinking below the closely-watched $50 threshold.
Oil has plunged 7% in the last two days, taking its first sub-$50 trip since mid-December. This breaks a period of relative stability in the oil patch since November, when OPEC reached a deal to cut production.
But the enthusiasm for the OPEC deal is fading due to rising concerns about the picture at home. Not only have U.S. crude stockpiles risen to record highs, but American shale producers could deepen the glut as they’re in the midst of a stronger revival than previously thought.
“We’ve got a surplus situation. We just have too much crude oil,” said Darin Newsom, senior commodities analyst at DTN.
Crude closed at $49.28 a barrel on Thursday, the fourth decline in a row and the lowest settle since November 29. Oil prices are now down 9% in March alone.
The oil weakness is rattling Wall Street a bit, just as the bull market in stocks celebrates its eighth anniversary. Energy stocks such as Halliburton (HAL) and Transocean (RIG) slid more than 2% apiece on Thursday after both slumped 3% the day before. The Energy Select Sector SPDR ETF (XLE) that tracks the energy industry is now down 8% this year.
oil below 50
“The word on everyone’s lips is oil,” Michael Block, chief market strategist at Rhino Trading, wrote in a note. He called the $50 level that crude slipped below a “crucial point.”
The oil selloff was sparked by further evidence that the U.S. continues to face a supply glut. Crude stockpiles soared by 8.2 million barrels last week, according to government statistics. It was four times as large as the inventory increase anticipated, and left stockpiles further in record territory.
More concerning to oil bulls, the supply glut is being driven lately by OPEC, the cartel that reversed strategies last year by supporting the market with an agreement to pump less crude.
