Global growth concerns married with headlines of increasing supply is proving to be a toxic mix for an oil market that is already feeling vulnerable.
However, we can now add in flow-based effects with momentum accounts going heavy on shorting crude futures, and the result is that Crude literally can’t find a friend in this market.
The buyers have simply walked away, seeing an ever-increasing probability of getting a fill at lower levels.
Momentum was already to the downside through Asia trade, with some clear technical damage in play, with front month Brent and WTI crude futures breaking the multi-month range lows with incredible ease, and this is impacting the psyche and the structure of the market.
European and UK-based traders have taken the baton and ran with it pushing WTI crude to $69.25 and Brent to $72.71, and we can look towards gasoline and diesel futures and see a similar order book dynamic here too.
Naturally, when we see this sort of volatility and reduced liquidity in top-of-order books price can be prone to wild snapbacks on limited news flow – but for now, crude is telling a progressively harrowing story and it is one that equity and rates traders are taking a steer from and increasing their need to hedge out risk.
