Bloodbath: Oil Plummets Amid Biggest Commodity Crash Since 2014

Despite a massive crude inventory draw, that initially sent WTI higher, it appears the weight of anxiety over global demand - stoked by an escalating trade war - further augmented by a soaring dollar, has sparked an avalanche of selling in the energy complex.

“There’s no doubt that that uncertainty continues to weigh, not only on the crude oil markets, but really all markets,” said Brian Kessens, who helps manage $16 billion in energy assets at Tortoise.

Oil has settled a whopping $5.46 lower, or over 7% down on the day, which is oil's biggest drop since Feb 2016.

“There is growing concern among market participants that the trade war will affect the real economy and put the brakes on global economic growth,” Commerzbank analysts said in a daily note. “We see the price slide as excessive given that Asian stock markets for example have suffered more minor losses in response to the latest development in the trade war. We expect to see a pronounced countermovement if the situation calms down again.”

But it's not just oil: the entire metals space is getting hammered on fears of a Chinese - and global - economic slowdown, with copper prices plunging as much as 4% in London, the biggest drop since December 2017; futures have lost almost 17% since peaking in early June.

Additionally, zinc, nickel, lead and tin all plunged on the London Metal Exchange as did shares in miners and metals companies including BHP Billiton and Antofagasta.

Agricultural commodities also dropped, with wheat down 4%, corn fell to a five-month low, U.S. soybeans slid to the lowest since 2015 and cotton sank 2%: in fact, the Bloomberg agriculture subindex has dropped to a record low price.

“The list will almost certainly mean retaliatory measures being raised by China,” said Charles Clack, an analyst at Rabobank in London. “So markets are still very concerned about the issue. We’ve seen China target agricultural products so far, so there is a fair chance of them continuing down this route on fresh tariffs.”

Gold was also hammered despite its safe asset nature, largely due to the relentless dollar surge. Other precious metals including platinum and silver are even harder hit because of their industrial use.

“The more industrially exposed the precious metals are, the further they’re down in trading today, but it does look like it’s a currency impact as much as anything,” said CMC chief market strategist Michael McCarthy.

The weakness has been so broad based that the Bloomberg Commodity index tumbling -2.7%, its biggest one day drop since November 2014!

Ironically, as commodities plunge, the prices of a whole slew of consumer products - those made in China - are about to surge as a result of the upcoming tariffs. How the US economy responds to this bifurcated price response, with deflation hitting commodities on fears of an economic slowdown alongside more highs in the dollar coupled with inflation for staples and other consumer products, may determine just how much longer the Fed can go on pretending it will hike rates another 7 or 8 times before it has to stop, start easing, and perhaps even do more QE.

Comments

FireBrander Wed, 07/11/2018 - 14:36 Permalink

The Market event occurs; then a reason is found.

"Oil Down!" it's Trumps fault/win.

But, if you look at the chart...it's been rolling over for months for many, many reasons besides Trump.

runningman18 FireBrander Wed, 07/11/2018 - 14:45 Permalink

Trump has very little control of the markets.  More like the central banks are controlling the moves.  People here should be careful about labeling any potential economic win as a win for Trump when he had little to do with it, because soon every potential economic loss will be applied to Trump too, and then what are they going to say?  The wins were all him but not the losses?   

In reply to by FireBrander

MoreFreedom runningman18 Wed, 07/11/2018 - 14:58 Permalink

Trump has very little control of the markets. 

Yet Trump got Saudi Arabia to agree to pump more, which shows him using his leverage as president to help oil consumers, and tank the market.  The Saudis have the lowest cost oil to produce in the world, and a lot of it. They have a financial interest in keeping oil high, but they also have an interest in gaining a greater share of the market, an interest in generating more money for the Crown Prince to use for his country, and a big interest in the US military's involvement in the Middle East (which is Trump's leverage). 

In reply to by runningman18

FireBrander JimmyJones Wed, 07/11/2018 - 15:20 Permalink

crushed from child care cost

1. Why did you have kids?

2. You didn't know these costs before you had kids?

3. Your "careers" and all of the "things" your paychecks buy are SOOO important that you have to stuff your kids in some other persons care?...they care very little about YOUR kid by the way.

 

Put your kids FIRST!..then you won't be "crushed by child care costs".

 

Nation of narcissistic fucking psychopaths.

 

PS. The wife and I earned ~50% less than we could have while our kids were young...because we put our kids first!...no "Child care costs"...and as a bonus, we got to be kids again, and grow up, again, through our kids...I'd do it again in a heartbeat...I will not go to my grave wishing I'd spent more time working to buy SHIT instead of spending it with my kids.

In reply to by JimmyJones

hgfhfgjuyjjhgj FireBrander Wed, 07/11/2018 - 15:39 Permalink

 

Google is paying 97$ per hour,with weekly payouts.You can also avail this.On tuesday I got a brand new Land Rover Range Rover from having earned $11752 this last four weeks..with-out any doubt it's the most-comfortable job I have ever done .. It Sounds unbelievable but you wont forgive yourself if you don’t check it

★CLICK►►HOME► MEDIA► TECH►http://www.todaysfox.com

In reply to by FireBrander

Erwin643 FireBrander Wed, 07/11/2018 - 15:44 Permalink

Noooo shit.

I got myself fixed when my son was eight months old. Couldn't find a job, spent time away from my son and his mom so I could make some money attending military training through the Army Reserve.

Was always scared shitless, because I had no parents or relatives to lean on (spent my teenage years in an abusive foster home).

In reply to by FireBrander

Jungle Jim FireBrander Wed, 07/11/2018 - 17:05 Permalink

The public school system was so bad that at age 13 I made up my mind to never have kids unless and until I could be dead certain they would never end up in the public school system. "I'm the last they'll ever get," I muttered.

This vow proved to be remarkably easy to keep, since the entire female population of the planet was totally on board with it, because I wasn't a basketball player or anything valuable like that.

In reply to by FireBrander

CatInTheHat MoreFreedom Wed, 07/11/2018 - 15:10 Permalink

The Saudis have NOT committed to the output Trump wants because they can't. The rise in oil prices is because of Trump's sanctions on Iran and hisa demand that the VASSALS stop buying from Iran. 

Iran out of the market pulls 2.5 million out of the loop. Trump (well, really Sheldon and Bolton) want regime change in Iran. Expect oil prices, in that case to continue way and above the 120 mark. Saudi Barbaria may well regret their screaming for sanctions and war on Iran. If shit gets serious, Iran can do some very nasty things to the Saudis trying to get their oil shipped past the Straight of Hormuz which Iran has threatened to close .

These tariffs are a tax upon the American people and are currently devastating farmers in states that voted for Trump. It's just another way for the US to create revenue, as the tax heist killed that revenue. Americans don't have enough to pay for it. I mean someone has to pay for that one TRILLION a year military budget. 

In reply to by MoreFreedom

Prosource MoreFreedom Wed, 07/11/2018 - 22:28 Permalink

Saudi Arabia's ruling class can't go to the bathroom without Israel's permission. Demonic forces control Israel which holds the world financially and/or through nuclear blackmail.  That said, God is sovereign, performs miracles, reveals Himself in nature and supernaturally, and allows all things in accordance with and pursuant to His eternal purposes. Whether visible, invisible, or unknowable - for the time being.. 

In reply to by MoreFreedom

Truth_Hoits runningman18 Wed, 07/11/2018 - 16:06 Permalink

Most presidents have very little control over the markets...short term, really.

Trump is able to influence moves in the markets, albeit temporarily.

I agree with most of your post, but the truth is, if the economy does poorly or if it does well, the people blame and credit the president. Right or wrong, they do that.

 

At any rate, I saw the Zero Hedge headline and thought I'd click it to see a 30 cent move down, as often is the case with ZH..."Oil Tumbles"...only to see it down a couple of dimes. They also blur out their low res charts so you can't actually see the numbers and then they scale the chart so it looks worse than it is. Pathetic, really.

 

Surprised to see that this wasn't the case this time. They usually call a 30 cent move a tumble, but this they call a crash. This is a nice tumble...it was around this price less than 3 weeks ago, so crash it is not.

 

Goofs.

 

Truth Hurts

 

In reply to by runningman18

ebworthen FireBrander Wed, 07/11/2018 - 14:55 Permalink

Let's get oil back down to $40/barrel, $30 even.

Then bring all our troops home and let people over their fight it out.

I'm certain we can buy oil with cash instead of blood.

And...we don't need to protect the Poppy crop either.

Pulling out of N.A.T.O. would be the icing.

In reply to by FireBrander

FireBrander Rothbardian in… Wed, 07/11/2018 - 14:42 Permalink

"Trade War" is not the correct term; Trump is performing a "Trade Re-balancing" act.

It will hurt in the short run, but in the long run, if he succeeds, we'll have a more self-reliant economy along with trade that is to our, the 99%'s, benefit rather than the 1%'s benefit.

~~~~~~~~

Mr. Trump!

Get on the ball!

This is not a "Trade War"....it is a "Trade Re-balancing"!

Get the tweet/memo out and have your staff adopt these words and correct the press as often as necessary! 

In reply to by Rothbardian in…

FireBrander Winston Churchill Wed, 07/11/2018 - 15:28 Permalink

Do we have balanced trade with our "partners"?

I say no...it is WAY out of balance and we are getting screwed.

This is a "re-balancing"...and yes, eggs will be broken...but that doesn't mean it's a "war".

In a "war", the goal is to crush your enemy into total submission...it that what Trumps wants with trade or is he just looking for 2-way deals that benefit both parties?...aka...a "re-balancing".

In reply to by Winston Churchill

MoreFreedom Rothbardian in… Wed, 07/11/2018 - 15:01 Permalink

I agree the trade war will impact the real economy, all around the developed world. The question is who will it bankrupt first: Chinese politicians or American ones.  It certainly won't have a big effect on Trump, nor me.  I look forward to the blood in the streets from the over leveraged people as they try to dump assets, so I can buy them on the cheap.

Consider what Smoot Hawley did: within 3 short years, US GDP was down about 50%, and then FDR was elected and he repealed it. Three Republicans of note, Smoot, Hawley and Hoolver, all lost their seats.  Trump unlike them, isn't a protectionist and wants to end tariffs (or get them to a reasonable 2-3% level).  The foreign government politicians and their investments with their crony protected business friends don't like it.  But they are highly leveraged and will shortly go bankrupt.  The politician friends also fear losing re-election from a trade war.  I'm concerned about the same for Trump. 

In reply to by Rothbardian in…

Cluster_Frak Wed, 07/11/2018 - 14:38 Permalink

Just a run to cash, since China is the number #1 commodity consumption driver and investors have no clue how the tariff game will play out, so it's better to wait it all out at the sidelines with dry powder in hand.

asteroids Wed, 07/11/2018 - 14:43 Permalink

It's pretty obvious that the paper market has boosted the price of oil to please the Arabs. Well, I think that's done for now. Back to Gartmans $44 ceiling.