Oil Plunges

The price of oil had one of its worst days all year today. Until recently, it looked as if oil had stabilized. In this case, the problem isn’t Greece but China. Investors are worried that a slowdown in China could reduce demand for crude. Off to the side, Iran has hinted that it’s looking to grow its exports.

The fall started late last week as U.S. producers said they wanted to ramp up production and data showed them adding drilling rigs to their fields for the first time since December. Iraqi production also turned out to be larger than expected, and data showed production across the Organization of the Petroleum Exporting Countries rising throughout June, analysts said.

“Even without additional Iranian barrels, there is already too much oil,” said Tim Evans, analyst at Citi Futures Perspective in New York. “We may have tipped the balance in the market.”

The U.S. benchmark oil price slid for the third session in a row, closing down $4.38, or 7.7%, to $52.53 a barrel on the New York Mercantile Exchange. Monday’s losses are the biggest in percentage terms for a single session since February, though they also included declines during limited electronic trading on the Friday holiday.

The reaction in the stock market was predictable — energy and materials were down the most while utilities and healthcare were mostly unscathed (an anti-Quadrant I day). Several of the major energy stocks like Chevron, Royal Dutch Shell, ConocoPhillips and Rio Tinto hit new 52-week lows. Our Buy List has no energy stocks so that helped us outperform the indexes by a little bit.

Posted by Eddy Elfenbein on July 6th, 2015 at 11:07 pm

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