Oil plunges after Fed and OPEC+ sound alarms on long-term demand weakness

Spencer Platt/Getty Images

  • Oil contracts sank on Thursday after gloomy commentary from the Federal Reserve and OPEC+ weighed on hopes for a market recovery.
  • West Texas Intermediate crude fell as much as 3.3%, to $41.50 per barrel. International benchmark Brent crude dropped 3%, to $44.02 per barrel, at intraday lows.
  • Fed officials expressed concern about the US economic recovery slowing amid elevated COVID cases, meeting minutes released Wednesday showed.
  • Members of OPEC+ raised similar worries, saying in a Wednesday meeting that global oil demand is recovering slower than initially expected.
  • Watch WTI crude trade live here.
  • Watch Brent crude trade live here.

Oil futures tumbled on Thursday after commentary from Federal Reserve officials and OPEC+ members reignited concerns of a lengthy market slump.

West Texas Intermediate crude contracts for September delivery fell as much as 3.3%, to $41.50 per barrel. Brent crude, oil’s international standard, sank 3%, to $44.02 per barrel, at intraday lows. The drop pulls both gauges from five-month highs and keeps the commodity trading within a narrow range. 

The decline follows the publication of minutes from the Federal Open Market Committee’s July meeting. Central bank officials raised concerns about the US economic recovery sputtering out as new outbreaks threatened another wave of COVID cases. Stocks sold off in late Wednesday trading on the news.

Read more: Stock market wizard William O’Neil famously turned $5,000 into $200,000 in just a few year’s time. Here’s the 7-part model he uses to sniff out winning stocks.

The gloomy sentiment was backed up abroad by OPEC+ members. The coalition warned in a Wednesday meeting that demand was returning to the market slower than initially expected, and that a resurgence of cases could push a full rebound into 2021. The group also called on Iraq, Nigeria, Angola, and Kazakhstan to deepen production cuts after overproducing in recent months.

Oil contracts largely remained above $40 per barrel as investors weigh economic reopenings against fresh hotspots. Though the level represents an improvement from April lows, weakened travel activity has dragged on oil demand throughout the pandemic.

Read more: JPMorgan pinpoints the triggers for a bond sell-off that can cause unusually large losses in everything from stocks to gold — and lays out how to be ready for it

Prices have also been vulnerable to the US dollar. The US Dollar Index gained on Wednesday after falling to a two-year low the session prior. A stronger dollar cuts into commodities’ appeal, as fewer are needed to buy futures.

WTI crude traded at $42.50 per barrel as of 11 a.m. ET Thursday. Brent crude traded at $44.80 per barrel. 

Now read more markets coverage from Markets Insider and Business Insider:

Inside Eagle Investors, the 20,000-member online community run by 2 Indiana University students that’s helping spearhead the Gen Z day-trading revolution

Gen Z and millennial investors are taking more and more risks as trading activity surges, E-Trade says

Hedge fund titan Seth Klarman boosted bets on 3 healthcare stocks and dumped tech giants in the 2nd quarter

Source: Read Full Article