Market Overview

What's Driving Oil's Ongoing Weakness?

What's Driving Oil's Ongoing Weakness?

The price of oil continued to fall on Tuesday and hit its lowest level in three months. Oil for September delivery traded as low as $42.36 a barrel, marking the lowest levels since April 20.

According to the Wall Street Journal, oversupply concerns contributed towards oil's weakness throughout July, which represents a reversal from a five-month rally that saw oil trade above the $50 per barrel level.

U.S. refiners have "overwhelmed even record demand" and international players are also sitting on supplies. Meanwhile, U.S. drillers are ready to ramp their production and companies have added 15 active rigs to oil fields last week.

Related Link: Morgan Stanley Is Taking Profits On Seadrill, Transocean Partners

"Right now, there is not much to be optimistic about," CNBC quoted Olivier Jakob, oil analyst at Petromatrix as saying. "We have to wait a little bit longer for the rebalancing."

Oil Trading Below 100-Day Moving Average

Oil is now trading below its 100-day moving average, which adds another layer to the bear case.

John Saucer, vice president of research and analysis at Mobius Risk Group told the Wall Street Journal that oil falling below the 100-day moving average is a "pretty compelling signal" and "certainly raises the expectation that crude could fall toward 40 bucks."

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Posted-In: John Saucer Mobius Risk Group Oil Oil Demand oil pricesCommodities Markets Media Best of Benzinga

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