Supplies, Iran Trigger Oil Plunge Below $50
Today’s Spotlight Market
Crude Oil futures have broken the $50 level on the downside, the lowest level at which the front month contract has traded since April.? Crude Oil fundamentals are taking a hit from all sides ? demand, supply, geopolitical risk ? and there is virtually no news out there to bolster the market.? Outside markets have done little to attract buying in commodities.? With the exception of Cocoa, there is very little positive news coming from the commodity markets, which has resulted in investors shifting more assets into the equity markets.
Fundamentals
Globally, Crude Oil production continues to outstrip demand to the tune of roughly 2 million barrels a day.? Oil demand had finally picked up the pace in the first quarter of the year and continued to grow into the second quarter due to low price levels.? However, Crude Oil may be the victim of its own success.? Demand growth is expected to slow to 1.4 million barrels/day in the second half of the year due to the increase in prices.? The World Bank expects 2016 Oil demand growth to slow even further to 1.3 million barrels a day.? The EIA reported a 2.5 million barrel inventory build this past week, which puts further pressure on the Oil market.? The Iranian nuclear deal, as tense as it may be, takes a sizable chunk of risk premium away from the Oil market.? The deal may also pave the way for fresh exports from Iran at a time when the US and OPEC are already keeping the spigots open all the way.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the September Crude Oil contract dipping below the 50.00 level.? Prices have held above minor near-term support at the 48.70 level.? Failure to hold here could result in prices testing the 45.00 level on the downside in the near-term.
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