Tumbling oil trades below $30 a barrel for first time in 12 years
Reuters - Jan 12, 2016
Oil fell briefly below the widely watched $30-per-barrel level on Tuesday, extending a selloff that has sliced almost 20 percent off prices this year amid deepening concerns about fragile Chinese demand and the absence of output restraint.
Prices settled down 3 percent, a seventh straight daily decline for oil. Traders have all but given up attempting to predict where the new-year rout will end, with momentum-driven dealing and overwhelmingly bearish sentiment engulfing the market. Some analysts warned of $20 a barrel; Standard Chartered said fund selling may not relent until it reaches $10.
By Tuesday, the crash had become almost self-fulfilling, with speculators too afraid to buy for fear of being burned by another false bottom. The slide appeared to first accelerate when it broke below the $32 area around 9 a.m. EDT (1400 GMT).
The $30 mark is both a psychological and financial threshold. In recent days, traders have poured money into $30 put options for expiration in February and March. Hedging activity usually picks up as oil prices near big a options level, as buyers and sellers defend their interests. More than 15,000 contracts traded on Tuesday and 18,000 contracts traded on Monday for the February contract, more than doubling Friday's volumes.
