'As goes oil, so goes the US equity market' appears to bethe new mantra. Just as yesterday's pump-and-dump tracked oil, so in the pre-market, WTI Crude plunged back to fresh 7-year lows after IEA warned that the oil glut will worsen, with prices lower for longer as demand remains subdued through at least 2017. This in turn sent US equities tumbling with Dow futures down 200 points (down 330 from Thursday highs).
Spot the difference...
As Crude's plunge was triggered when the International Energy Agency (IEA) warned global oversupply could worsen in the new year. As Reuters reports,
Brent slipped below $39 per barrel for the first time since December 2008 as the IEA, which advises developed nations on energy, warned that demand growth was starting to slow.
Prices have tumbled this month after OPEC failed to impose a ceiling on output. OPEC producers pumped more oil in November than in any month since late 2008, some 31.7 million barrels per day.
"Consumption is likely to have peaked in the third quarter and demand growth is expected to slow to a still-healthy 1.2 million bpd in 2016, as support from sharply falling oil prices begins to fade," the IEA said in its monthly report.
Should sanctions on Iran be lifted, its exports could rise, adding to the market's oversupply.
"The next quarter is going to be particularly tough as we go from a high-demand to a low-demand quarter," said Richard Gorry, director of consultancy JBC Energy Asia.
"Can you rule out $20 per barrel? No, you can't," he said, although adding that prices would not likely fall that far.
The Dow is now down over 300 points from yesterday's highs...
And not hel,ping the US credit market,
"There is evidence the Saudi-led strategy is starting to work," the IEA said, referring to the producer group's decision to maintain high output to safeguard market share.