Oil’s bear-market relapse has put the black commodity on track for its first annual drop since 2015. And while many expect a rebound in 2019, the outlook remains tilted to the downside thanks to actual and perceived imbalances in the market.
Volatile Fourth Quarter
Oil futures drifted between gains and losses at the start of the week, as markets consolidated following a series of volatile swings. The West Texas Intermediate (WTI) benchmark for U.S. crude futures reached a session high of $46.43 a barrel on the New York Mercantile Exchange before falling to a low of $44.73. It now sits at $45.34 a barrel, where it was virtually unchanged from the previous close.
Brent crude, the international futures benchmark, followed a similar trajectory. Prices peaked at $54.82 a barrel through the early morning session before falling to a low of $52.66 a barrel. Brent last traded at $53.44 a barrel, up 23 cents, or 0.4%.
WTI is on track for a yearly loss of 25%, while Brent has shaved 20% off its value since Jan. 1. Both contracts re-entered bear-market territory in the fourth quarter after falling more than 20% from their peak. The peak-to-trough would eventually widen to 40%, which signified the market’s worst downtrend since the price collapse of 2014.
The WTI contract peaked at $76.41 a barrel on Oct. 3, the highest in four years. On Christmas Eve, prices crashed to a new 17-month low of $42.53 a barrel.
Oil to Face Difficult 2019
It wasn’t so long ago that analysts were talking about the possibility of $100 a barrel oil by Q1 2019. Now, triple-digit prices seem virtually impossible as the market contends with oversupply constraints,