Oil prices dropped with traders resuming the sell-off that started after the decision of OPEC not to take any drastic action to support oil prices.
Brent, the global benchmark declined 0.9% or 65 cents to $71.89 per barrel on the ICE Futures Europe while the US oil contract dropped 1.5% or $1.01 to $67.95 per barrel on the New York Mercantile Exchange.
Reuters quoted analyst at CMC Markets, Michael Hewson as having said, “I am not surprised the price is going down. The market is looking forward for a renewed sense of direction and trying to figure out if we have hit the bottom or if we are about to go lower again.”
“I think there is a lot of ebb and flow, and at the moment there is a battle going on between the bulls and the bears in light of the really strong rally we saw yesterday.”
Oil had dropped since June, reaching the lowest since October 2009 on Monday with new supplies of high-quality, light crude from North America overwhelming demand, which has been suffering from the slowing economic growth in Europe and China.
The Wall Street Journal reported that production capability is still high and oil supplies are more than likely to grow despite the drop in prices, according to president of energy-advisory firm, Rittersbusch Associates, Jim Rittersbusch.
Mr. Rittersbusch said, ‘Two-sided price volatility is apt to develop following a major price plunger. It will still take some time for the market to sort out the ramifications for the OPEC announcement.”
Banks have started lowering their price projections. On late Monday, Societe Generale SA said that it had cut its estimates by more than 205, expecting Brent to hit $70 per barrel and the US contract to reach $65 through 2015 and 2016.
Johannes Van Der Tuin and Jan Stuart, Credit Suisse analysts said, “Oil prices have now gone past their tipping point.”
To contact the reporter of the story: Jonathan Millet at firstname.lastname@example.org