Here’s what the experts had to say after oil crashed back into bear market territory yesterday:
Jim Reid, Deutsche Bank
“Rather than there being one specific catalyst yesterday the move just appeared to be an extension of the slide that we’ve seen for the last few months now with markets questioning the impact of the OPEC-led output cuts and also a reinvigorated US shale market. Risk assets were hit hard too as a result.”
Mr Reid also noted that oil is now back at levels last seen on September 16 last year, highlighting it has only been lower than this for 6pc of the time (188 days) since the start of 2005.
Jakob Ekholdt Christensen, Danske Bank
“Focus will most likely be on the developments in the oil markets where prices have fallen back significantly over the past month. The sharp falls are weighing on global risk sentiment and therefore have been setting off significant movements in financial markets in the past days.”
Lukman Otunuga, FXTM
Although OPEC initially displayed good intentions when it exempted some members from the production cuts, Mr Otunuga thinks that this has come back to haunt them with more production from Libya, Nigeria, and Iran.
He said: “With the bias towards oil heavily tilted to the downside, further losses should be expected as bears exploit persistent oversupply concerns to ruthlessly attack the commodity.”
Naeem Aslam, Think Markets
“Investors are becoming a little anxious towards the rising production out of Libya, however, OPEC has stated it before that the production level out of Libya is already taken into account in the part of their production cut strategy. Saudi Arabia also reported higher export data on Tuesday. It is important that not only production cuts are under control but also the export numbers as well.”
Michael Hewson, CMC Markets
Mr Hewson points out that there is a risk we could see further declines in oil prices, particularly if shale producers continue to add rigs, and demand continues to slow in Asia, and there are no further supply disruptions.
He added: “The key support levels sit down at the November lows at $43 on Brent and $42 on US WTI, which if they give way $40 could come into view very quickly indeed and drag equity markets down with them, especially if today’s weekly inventory data disappoints.”