Why Crude Oil Could Still Fall To $30 Per Barrel
Mercenary Trader CEO Jack Litle told Benzinga that the oil market is "very interesting." On Wednesday, the price of crude tumbled – with the United States Oil Fund LP (NYSE: USO) losing more than 4.4 percent following the latest inventory figures.
In early trading Thursday, that route is continuing as the price has slipped another 0.8 percent.
Litle attributes this to the ongoing price war between Saudi Arabia and U.S. shale companies. Saudi Arabia has indicated a willingness to keep supply ample, even as prices fall in order to choke out U.S. shale oil companies. However, Litle said that even if some current companies are forced into bankruptcy, other companies will buy those assets and keep the oil pumping.
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For that reason, the trade could spiral out of control and crude prices could fall to $30 per barrel. That would be another $10 drop, or nearly 25 percent.
At that time, low prices may threaten OPEC's status as a cartel, in addition to bring about ramifications in the debt market. Litle said that he sees the potential that oil service companies are at particular risk. In particular, this could mean continued share price declines in Schlumberger Limited. (NYSE: SLB) and Halliburton Company (NYSE: HAL).
In total, Litle cautioned those trying to time the bottom; you may get burned.
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