Oil extended its slump on concerns that slowing global growth will erode consumption a day after the market posted its biggest decline in more than a year.
(Bloomberg) — Oil extended its slump on concerns that slowing global growth will erode consumption a day after the market posted its biggest decline in more than a year.
After a strong third-quarter rally, crude has retreated sharply amid worries about the effect of elevated interest rates on the global economy, which have also rattled equity and bond markets in recent weeks. Oil’s drop followed a plunge in gasoline futures after data showed stockpiles swelled in the US and a measure of demand fell.
West Texas Intermediate settled near $82 a barrel, crossing beneath its 50-day moving average for the first time since July. Volatility also surged during the rout, roiling options markets.
“When crude turns, it is always fast — especially to the downside,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “The speed of the selloff was also driven by the length in the market that had built up over the last month. Many of the new longs buying into the $100 crude trade were low-conviction momentum traders who are easily spooked out of the market.”
Crude’s recent rally — which had brought the US benchmark above $95 a barrel near the end of September — had fueled speculation that a return to $100 oil was in the cards. Still, others remained skeptical, with notable bear Citigroup Inc. making the case that prices were on course to reverse as the market returned to a surplus.
Crude’s tumble came despite announcements from Saudi Arabia and Russia that voluntary production cuts would remain in place through the end of the year. In addition, an OPEC+ committee recommended no change to collective curbs. On Thursday, Saudi Arabia hiked the price of its flagship crude for customers in Asia for a fifth month.
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