Oil Set To Post Longest Losing Streak In 29 Years

The stream of bad news for oil investors continued this week, as news of a surprise U.S. inventory build was followed-up by weak Chinese manufacturing numbers. While global production continues to outpace demand by more than 2.0 million barrels per day, weakening demand from China, the world’s second largest oil consumer, is compounding the downward pressure on oil prices.

Losing streak
This week’s bad news sent U.S. crude prices lower to nearly $40 per barrel, its lowest level in about 6.5 years. The downward trajectory is nothing new to the U.S. oil market, which is currently caught in its longest weekly losing streak in 29 years. 

OPEC concerned, but standing fast
While many U.S. producers have been frantically shutting down rigs to reduce costs and increase efficiency, OPEC has stubbornly refused to scale back production for fear of losing market share to U.S. producers. An OPEC delegate said this month that the organization is “concerned” by falling oil prices, but has no intention of reducing production any time soon.

“Oil prices will remain volatile… but they will recover,” the delegate said, citing lack of clarity in the market as one reason for OPEC’s inaction.

How to trade it
With shares of the United States Oil Fund ETF USO already down 62 percent over the past year and sitting at all-time lows, is there still room to the downside?

“The trend is down – stick with it,” advises Robin Bieber, a director at London brokerage PVM Oil Associates.

Until the negative headline momentum subsides, it appears as if oil investors will continue to feel the pain.