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Consecutive record oil loss has sunk prices on bear market and that has a global impact. The chaos rocked everyone from bond traders to political leaders and fund managers.
As a result of this behavior, US oil on Tuesday signed its worst streak in history, when connecting 12 days by continuing to decline.
Reference to WTI crude oil on the Mercantile Exchange in New York for December delivery fell 7.07 percent, to 55.69 dollars per barrel, the worst level since November 16, 2017 and the biggest decline in a day since February 4, 2015.
While analysts are looking for answers to what is to come in terms of prices, they will do well to observe the following conflict points in searching for clues. about the future of crude oil.
Supply crisis
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United States decision about give an exception which will allow importers Iranian oil continued to buy even though sanctions disappointed expectations impending supply crisis, which helps trigger the fall of oil.
Meanwhile Organization of Petroleum Exporting Countries (OPEC) and their allies, including Russia, have taken more barrels, because they expect it Iranian exports will fall to zero, the de facto group leader, Saudi Arabia, said that producers must reduce about half of the increase in production they made a few months ago.
However, US president Donald Trump tweeted that they should not reduce production, which led to an open confrontation between the US and OPEC governments before meeting in Vienna on December 6.
The question is whether the Saudis will continue to press for reduction, if their allies will be equal to them or if the risk of arousing Trump's anger will persuade them to stop so far.
Dollar down payment
This week the dollar reached the strongest level in 18 months against a basket of foreign currencies. Because crude oil is traded throughout the world in the United States currency, oil is becoming more expensive in local denominations for developing countries.
Although prices in the global reference dollar for crude oil, Brent, are now declining this year, it continues 11 percent more expensive in Indian rupees and 14 percent in Brazilian reais. It weighs on demand in the market which is often high growth for oil consumption.
Plastic weakness
Part of the pressure on the refiner comes from weakness of the petrochemical sector, which accounts for 12 percent of world oil demand.
Asian ethylene producers, a key component to produce everything, from plastic bags to toys, they are pressured by a new factory in the US that uses ethane, a product derived from shale gas, not naphtha, from petroleum.
Fund behavior
Hedge funds reduce their net long position in New York oil to the lowest level since September 2017, and thus extend the decline to nine consecutive weeks.
The number of bullish bets in American barrels fell more than 65 percent since January, when it reached record levels, because of concerns over national oversupply and stock growth frightened fund managers.
Reversal can be a sign that investors have recovered trust in crude oil.
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