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Crude -8% as selling accelerates; oil approaches bear market

Sep. 08, 2020 10:47 AM ETCrude Oil Futures (CL1:COM), XLEXLE, USO, COM, CL1:COMBy: Kim Khan, SA News Editor91 Comments
  • Crude oil and energy stocks are sinking after a surprise cut in the price of Saudi Arabian oil undercut a market already in a correction.
  • Crude futures (CL1:COM-8%) are down to $36.57/barrel, a level not seen since mid-June. Prices sank 7.5% last week and were down 10% from their highs before today. Now crude is 16% off its recent high of $43.35/barrel hit on August 25, approaching a bear-market drop of 20%.
  • The U.S. Oil ETF (USO-6.7%) is down 14% from its late-August highs. It fell through its 100-day simple moving average today, which it had only crossed on August 5.
  • Energy stocks are already well into a bear market from highs in early June, with the SPDR Energy Sector ETF (XLE-4.2%) down 28%. All of its components are in the red today.

  • Looking at momentum, XLE's relative strength index plunged into oversold territory in today's trading, falling to 27 from 52.5.

  • After spending a long period in the low $40/barrel range, the confidence of oil bulls has started to wane on demand concerns.
  • U.S. gasoline demand looks to be stalling. Last week the EIA said gasoline demand for the week ended August 28 fell to 8.78M bpd from 9.16M bpd. Demand is about 8% to 10% lower than this time last year and isn't narrowing that gap, Commerzbank commodities analyst Eugene Weinberg told the Wall Street Journal.
  • A rebound in the dollar could also be hurting prices. The dollar index is down 4.5% from its late-June high, but up 1.5% since the end of August.

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