http://www.wsj.com/articles/crude-oil-falls-further-in-asia-to-fresh-multiyear-lows-145214177101/07/2016
U.S. oil prices joined the global benchmark at levels last seen in 2004, hammered by the market turmoil in China, the world’s second-biggest consumer of the fuel.
Worries about slowing economic growth, especially in China, are helping to drive the sharp drop in crude prices. With producers in the U.S. and Mideast still pumping oil at a fast clip, a drop-off in demand would add to the global supply glut that has shaved about 70% off prices over the past 18 months.
The U.S. benchmark crude-oil contract tumbled 70 cents, or 2.1%, to $33.27 a barrel Thursday on the New York Mercantile Exchange. That is the lowest close since February 2004.
Just a month ago, oil markets were preoccupied with the idea of oil staying below $40 a barrel. Now a number of analysts say $30 a barrel is the next stop for the battered commodity.
“It looks more likely than not that we will drop below $30,” said Chris Main, oil strategist at Citigroup. “And with fundamentals looking pretty terrible, we could stay there for a couple of months.”
Some analysts are even calling for oil to drop into the $20-a-barrel range, a view that grabbed headlines back in September when it was espoused by Goldman Sachs analysts. At that time, the investment bank was a rare outlier. Then, the average forecast of 12 investment banks polled by The Wall Street Journal was for $47 a barrel in the first quarter of this year.
Wall Street and industry analysts have repeatedly been proved wrong during the oil rout, whose speed and scope have defied even the most pessimistic forecasts.
“Demand won’t be coming to the rescue this time, with China and the way the world economy is shaping up,” said Doug King, chief investment officer at RCMA Asset Management and manager of that firm’s $225 million Merchant Commodity hedge fund. China consumes about 12% of the world’s oil, making it the world’s No. 2 user after the U.S.
