Oil prices in bear market trajectory – Deutsche Bank

Oil was one of the major market movers yesterday as WTI fell -2.19% yesterday to close at $43.23/bbl (although did hit an intraday low of $42.75/bbl), which means it has now fallen a little over 20% from its highs back in February (using close-to-close prices – closer to 23% using intraday pricing) and therefore slipping into the definition of a bear market, explains the analysis team at Deutsche Bank.

Key Quotes

“Rather than there being one specific catalyst yesterday the move just appeared to be an extension of the slide that we’ve seen for the last few months now with markets questioning the impact of the OPEC-led output cuts and also a reinvigorated US shale market. Risk assets were hit hard too as a result. The S&P 500 (-0.67%) suffered its biggest decline since May 17th while the Stoxx 600 (-0.70%) was down a similar amount. EM currencies sold off while sovereign bond yields fell in tow. 10y Treasuries ended the day 3.2bps lower at 2.157% while 10y Bunds were 1.9bps lower at 0.258%.”

“Oil is now back to levels last seen on September 16th last year and even though we’ve rallied hard since February 2016, Oil has only been lower than this for 6% (188 days) of the time since the start of 2005. That is mostly made up of 44 days in 2008/09 and 112 days in late 2015/ early 2016. So these are pretty stressed levels relative to the past decade or so.”