The first time oil tumbled two weeks ago when it crashed by 7%, Goldman – which has been telling its clients to keep buying crude all the way down from $80 – blamed it on “negative convexity” and other arcane reasons because the far simpler explanation, more supply, less demand, would be just too obvious for its brilliant strategists not to notice.
There was no “negative convexity” – Wall Street’s catchphrase to “”explain anything that can not be otherwise explained -overnight, when oil resumed its plunge, sliding to the lowest in a year and dropping below $51 after Saudi Arabia signaled its output reached a record high, while growing U.S. inventories stoked fresh concerns over a global supply glut.
WTI futures dropped as much as 5.4% from the Wednesday settlement (there was no Thanksgiving settlement price) and were set for a seventh weekly decline, dropping as low as $51.62/barrel the lowest price in one year.
Brent dropped below $60/barrel for the first time since October 2017.
And with Iranian export restrictions lifted after Trump provided most of its clients oil import waivers, traders are now focused on growing risks of a new glut of crude: Saudi Arabia’s oil minister said Thursday production from the world’s largest exporter climbed further this month after a surge in October, and U.S. stockpiles have risen for nine straight weeks.
Saudi Arabia is producing oil in excess of 10.7 million barrels a day, more than in recent years, Energy Minister Khalid Al-Falih said, giving the strongest indication yet that the kingdom has boosted output to record levels.
“We were at 10.7-something in October, and we are above that. We will know exactly when the month is over,” Al-Falih said. “We will not flood the market. We will not send oil that customers don’t need. And we’ve started doing that in December,and I expect we’ll continue doing that into the new year.”
