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US Crude Oil Slides Into Bear Market Territory

The evaluation of U.S. West Texas Intermediate (WTI) crude oil fell once again on Thursday to hit its ninth consecutive day in the red. In the get ready, plunging oil prices established a new seven-month low for U.S. crude, placing it at the cusp of spawn market territory. Generally defined as a decline of 20% or more from the most new major peak, entry into a bear market is considered an ill-starred sign that hints at a negative trend reversal and further quiescent losses ahead.

Why Crude Is Falling

The sharp dive in oil prices is attributed to the principle combination of increasing supply and potentially decreasing demand. On Wednesday, the Vitality Information Administration reported a very hefty increase of 5.8 million barrels in U.S. familial crude oil inventories against expectations for an increase of only around 2 million barrels. The old six weeks have also seen several other massive increments in inventories. With both domestic and international output consistently on the make something of oneself and global demand forecast to decline, the slide in crude oil prices has been no dominant surprise.

Sustained Breakdown

On the chart below, the precipitous fall in oil expects prices is clear. From early October’s nearly four-year foremost at $76.90, crude first fell into a -10% correction and then diminished below its key 200-day moving average in late October. From there, the shrinkages continued on to more than -20% from the early October tiptop, as of Thursday.

What May Be Next

The key question now is whether this sizable cast off will turn into a full-blown downtrend for oil prices. Of course, these typefaces of major trend changes are always tough to predict, but generally, overproduction and oversupply pay-offs are rarely resolved quickly. As the saying goes, the best cure for low oil evaluates may be low oil prices. In other words, a falling crude market may simply beggary to fall further in order to make it less compelling and less utilitarian for oil producers to continue overproducing.

Chart showing the performance of WTI Light Crude Oil Futures prices

Source: TradingView

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