Crude oil collapses on demand concerns

Crude oil collapses on demand concerns

In the last four weeks, crude oil market collapsed by 12-15 per cent; and last week, Brent briefly traded below the psychological $60 a barrel, a five-month low. This is notwithstanding the current supply tightness following US sanctions on Iran oil and involuntary outage in Venezuela. In the US, oil output has reached a record high which is weighing on the price of WTI trading close to $50 a barrel.

Why did oil fall steeply? There are concerns on two counts. While economic data coming in from major economies are weak, the trade conflict between the world’s two largest economies, the US and China, continues to escalate. This is making demand outlook rather gloomy.

Speculative investors holding long positions on the exchanges have been steadily exiting the market as evidenced by fall in net long positions. In the current scenario, punters see no significant opportunity for an upside price movement anytime soon. Read More

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