Nightmare Before Christmas For The Oil Market

.The FTSE 100 opened at 5952 today and climbed above 6,000, but it’s mark into a positive trade was short lived as the index soon saw a downward trend where it closed at 5874 (-1.32%).

Like Rudolf’s nose, the markets have been lighting up red today. Brent Oil has fallen for the 7th consecutive day where at the time of writing this it was at $37.67(-1.23%) per barrel. Crude oil hit new lows that haven’t been seen since February 2009 as it fell below $35 per barrel. The decline seen today was primarily caused by investors fearing that the global oil surplus would worsen in the coming months as they anticipate a price war between leading Opec and non-Opec producers. Opec ministers met at the beginning of December where it announced they would lift its output ceiling earlier in the month, since Brent is down by 16% and Crude is down 17%.

Iraq and Saudi Arabia have been pumping out barrels of oil at record levels this year which has led economists to believe oil stockpiles will grow through 2016, albeit, at a anticipated slower pace. As they re-enter the market in the New Year, Iran’s deputy oil minister has already made comments that they will not be holding off on production to keep prices up. The country seems to be prepared to sell oil at current prices or even lower as it needs the revenue to sustain its economy, the country’s oil exports are set to create a six month high at the end of this month too. It appears to be a nightmare before Christmas as the news of Iran fulfilling requirements and the lifting of sanctions comes into place, is coming in faster than expected. Iran is not the only country which will not be holding back either as Gulf producers and Russia have announced in the past that they would not cut output even if prices fell below $20 a barrel.

The negative outlook on the oil and commodity market has hit the FTSE 100 hard as we have seen companies such as Glencore, Anglo American, BHP Billiton, BP and Shell close down for the day by -6.29%, -4.15%, -3.59%, -2.57% and -2.19% respectively.

At the close, European indices were down with the FTSE 100 -1.32%, the CAC 40 -1.68%, and the DAX -1.94%. Asian indices were also down for the day with the Hang Seng -0.72% and the Nikkei 225 -1.80%. At the time of writing this, US indices were down with the NASDAQ -1.09%, the S&P 500 -0.52% and the Dow Jones -0.27%.