Wary Investors Push Oil Prices Back Down
By Christopher Alessi
LONDON--Oil prices slid Wednesday morning, as investors continued to cash in on last week's bullish market and retrace crude's upward march.
Brent crude, the global benchmark, was down 0.71%, at $55.60 a barrel on London's Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate Futures were trading down 0.60%, at $50.13 a barrel.
The price of Brent nearly hit $60 a barrel last week but has since come down by around 6% after "edgy traders" reversed bullish positions to take profits, according to Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.
"A return of the recent feel-good factor now seems like a distant prospect and any price gains will be hard won," Mr. Brennock noted.
Crude prices had been boosted in part last week by an independence referendum in Iraq's semiautonomous Kurdistan region. In response, neighboring Turkey, which opposed the move, threatened to block roughly 500,000 barrels a day of Kurdish crude exports. That potential supply disruption to the global market sent prices north.
But the market "moved prematurely on news of the Kurdish referendum, which was nonbinding," said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas.
Mr. Tchilinguirian said investors were perhaps also factoring in macroeconomic shifts on the horizon, including an expected slowdown in Chinese growth in the second half of the year. China is the one of the world's largest consumers of commodities like crude oil.
The spike in the price of Brent last month was also "driven to a large extent by speculation," according to analysts at Commerzbank. "Brent is showing more and more signs of speculative excess," the analysts wrote in a note Wednesday.