Oil is on track for its fourth consecutive weekly loss and has plunged today to the lowest since July. WTI crude oil is down $3.60 to $73.11, a drop of 4.2%
It’s the lowest since July 11 as the market trades on a surprising amount of supply, despite OPEC removing around 3 million barrels per day. Coming into the quarter, analysts were looking for inventory draws of around 2 million barrels per day but that’s turned out to be more like 200k bpd as OPEC countries have increased exports.
Officials at OPEC say that’s a seasonal pattern and not a sign of quota cheating but it’s led to a rout in oil prices. Now OPEC will have to decide on whether to continue to curb production or to go after market share.
Oil daily chart
We could very soon be talking about oil in the $60s.
Importantly, the rest of the market is trading off signals from oil. The drop in prices is disinflationary and that should bring the Fed closer to its 2% inflation target. Moreover, it’s helping yields fall across the board with US 10s down 10 bps to 4.43%.