West Texas intermediate oil is crashing through its $30 a barrel support level in search of a new bottom, amid the ongoing correction in China, weak demand globally and no signs of production slowing down.
While that is generally good news for consumers of products like gasoline, the worst may be yet to come for oil producers, not just overseas in Saudi Arabia, Iran or Russia, but also including those domestic producers who have been at the heart of the oil shale hydraulic fracturing boom.
Overall, crude is more than 73 percent off its previous high of $116.32 in April 2011.
The $30 support level is already worse than during the financial crisis, when it bottomed at about $39 a barrel in Feb. 2009.
“Three major investment banks — Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. — now expect the price of oil to crash through the $30 threshold and into $20 territory in short order,” reports the Wall Street Journal’s Bradley Olson and Erin Ailworth.
$20 a barrel for oil?
Yikes.
Those are levels not seen since the early 2000s, right at the beginning of the commodities boom that was led by the rapid expansion in emerging markets like China, Brazil and others.
Now that those emerging markets are in a full scale correction, it appears the price of oil is finally reverting to the mean.
But, it’s not just oil.
Food is dropping too.
...With everything seemingly moving in a single direction, perhaps that is why the Royal Bank of Scotland recently issued a client note stating, “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.”...
No comments:
Post a Comment