US Crude Oil Continues its fall amid Investor flight to safer Grounds
US Crude oil resumed its fall on Tuesday, for a second day as investors are fleeing to find more hospitable havens on the worries about the looming bankruptcy on Greece and losses experienced in the Chinese stock market. Coupled with the complicated selling strategies, oil is under the threat of being pushed into a bear market.
The determination by Iran to seal a nuclear agreement with global powers to export more of its crude oil to a market that is already oversupplied, as well as the re-ignition of a major oil terminal in Libya also impacted the poor prices in oil.
After Greece voted against the bailout conditions set by its international creditors, investors began moving onto the dollar and United States bonds, which are considered to be relatively safer as the Greek banks exhausted their last few days of cash. The Chinese equities also continued weakening, ignoring the support measures initiated by Beijing.
The dollar hit a high note for five weeks in a row, hemorrhaging the demand for commodities that are dollar-dominated from those using other currencies. According to Thomson, executive vice-president at Powerhouse, a Washington-based commodities broker specialized in energy, ‘’The US dollar and Treasuries are the commodities that people are purchasing at the moment.’’
US Crude CLc 1 declined by 44 cents to $52.09 for every barrel after falling almost $2 at the session low, then hitting a brief rebound. Since the close of Thursday for the sharpest fall experienced since 2011, US crude oil has lost an estimated 10%.
Technically, US crude is moving towards a bear market, considering that it has lost about 20% from a high of more than $62 just one month ago. A technical analyst said, ‘’if it continues with this trend, it could gain the momentum of testing the six-year low of $42.03 that it set in mid-March.’’