Oil prices fell hard this morning with $92 a barrel coming easily into view. US oil stockpiles dropped over 3 million barrels last week which appears to have failed to support the price of the black gold. Speculative reports of unilateral action by Saudi Arabia to boost production have many investors going short on physical assets. Diminishing demand by the manufacturing and industrial sectors of multiple economies may also be adding to the weight oil prices are bearing this week.
With today's steady downwards movement, traders appear likely to see oil reaching a support line early this week. Whether oil traders decide to lift oil prices from a buy-in on physical assets, or whether they decide to pull away from the black gold out of a perceived global oversupply, is a point traders will bear witness to this week. Such sharp downward price action, however, is typically met with staunch resistance as the new price gets tested. We should see news from today's ECOFIN meetings generating tension among risk sensitive traders which may cause large swings in and out of commodities.
