Oil Logs Biggest Quarterly Drop in Six Years as Supply Fears Fade
Crude prices collapsed their most in six years last quarter as Hormuz workarounds and China's import slowdown drained the supply panic.
Oil just had its worst quarter in six years, and if you've been holding energy longs, that stings. The historic supply crunch that sent traders scrambling is unwinding faster than the bulls expected, and two forces are driving the reversal hard.
First, traders found ways around the Strait of Hormuz chokepoint — the critical Persian Gulf passage that handles a massive share of global crude flows. When that threat loomed, oil spiked on fear. Now that workarounds are in play, the fear premium is bleeding out of the market fast. That's not a small deal. Hormuz anxiety alone had been one of the biggest geopolitical risk bids in energy markets.
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Second, China hit the brakes on crude imports. Beijing's demand slowdown is real, and it showed up in the import data. When the world's largest oil buyer pulls back, the math on global balances shifts quickly. Oversupply risk moves to the front of every trader's mind, and that's exactly where it sits right now.
Put these two together and you've got a market that priced in a worst-case scenario and is now repricing for something much closer to normal. The question you need to answer is whether this repricing is nearly done or just getting started. Momentum is bearish, but any flare-up in Persian Gulf tensions could reverse weeks of selling in a single session. Stay nimble.
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