Oil prices sank to 13-year lows on Thursday as bearish forces took over. The comments from the head of the Federal Reserve on Wednesday reflected waning confidence in the health of the global economy, and crude oil stockpiles continue to stay at elevated levels. The downward pressure on oil was accentuated by the broader market sell off.
Bonds and gold surged as investors flocked to safety. The Dow Jones Industrial Average sank 1.6 percent.
Oil prices staged a brief rally on news that the UAE’s energy minister said that OPEC was ready to negotiate a coordinated production cut. But it is unclear if the minister was charting new territory or merely restating the group’s previous position. The minister went on to say that today’s low prices are not sustainable and that leaving things up to the market will result in the necessary adjustment, as higher cost producers have already been forced to cap production.
We have seen OPEC rumors move the market before, only to disappoint. OPEC production cuts should probably not be trusted until something much more concrete comes out.
By Charles Kennedy of Oilprice.com
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Charles is a writer for Oilprice.com