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Crude Oil Prices Decline on Concern over Default

By  +Follow October 15, 2013 9:53AM
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The price of crude dropped Tuesday, with futures contracts for November 13th delivery trading down almost 1.3 percent for West Texas Intermediate and over 1 percent for Brent. The primary culprit appears to be persistent concern over the government shutdown and the possibility of a default on American debt.

Potential Debt Default Drives Down Prices

At the heart of falling crude prices was continued concern over the potential for a government debt default. The potential economic collapse that would follow a debt default would most likely result in decreased demand for crude at home and abroad, making oil a much less attractive investment for some.

"Crude oil prices retreated ... as the US budget issues in Washington weighed on market sentiment and raised persistent concerns about a slowdown in the US oil demand," said Sucden brokers analyst Myrto Sokou on Monday. "The main focus remains on the US debt ceiling and government shutdown as the markets are hoping for a resolution to the issue before Thursday's deadline."

Oil markets kept a close eye on news out of Washington, but Tuesday seemed to indicate that the stalemate wasn’t coming to an end.

Supply Up As Well

The continued drop in prices comes after prices reached a 14-week low last Wednesday when the government reported higher-than-expected inventories of crude, adding the price-pressure of increased supply to the already present potential for decreased demand.

"We seem to be tipping the scales back toward another test of $100 a barrel," said Tradition Energy broker and analyst Gene McGillian on Wednesday.

ETFs Hit as Well

Plunging crude prices hit ETFs hard as well, with the United States Oil Fund ($USO) dropping over 1 percent and the PowerShares DB Oil Fund ($DBO) declining over 0.5 percent. Joining them were several equities ETFs tracking oil producers, with the Market Vectors Oil Services ETF ($OIH) off over 0.5 percent, the iShares Dow Jones US Oil Equipment ETF ($IEZ) dropping almost 0.65 percent, and the SPDR S&P Oil & Gas Equipment & Services ETF ($XES) plunging over 1 percent.

 

[Image Courtesy of Wikimedia Commons]

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for uso
Greg Harmon, CMT
25 Nov 14 13:51:55
$CL_F $USO confirming resumption of downtrend, 72/66 support, resistance 77/81 http://t.co/CiYnRjA2tU
alpe pinnazzo
25 Nov 14 13:41:30
*CME RAISES NYMEX CRUDE OIL FUTURES MARGINS $USO
JT Freeze
25 Nov 14 13:40:20
@HedgeBound Thx for the heads up yesterday on $uso and $oas
UPBOptionMil
25 Nov 14 13:29:03
$USO lower oil and cheaper prices at the pump are more effective than QE? Extra $ in consumers pocket without cutting taxes
Bukkake
25 Nov 14 13:28:59
RT @JT6080: @DanChesler hikkake turned into bukkake. $WTI $USO
JT
25 Nov 14 13:28:33
@DanChesler hikkake turned into bukkake. $WTI $USO
Access
25 Nov 14 13:26:46
RT @fabiancapital: Have to wonder when the pessimism in $USO will finally spark a massive short covering rally. Same can be said for prec …
UPBOptionMil
25 Nov 14 13:26:30
$USO plunging to multi year lows into the close
Gotham City Capital
25 Nov 14 13:25:19
$USO Exercising Patience With Oil.. All Eyes On OPEC Meeting.. May Want Lower Depending On Saudis.. http://t.co/v94uTSDTh0
361 Capital
25 Nov 14 13:23:59
$SPX -0.1% and Bonds $TLT +0.8% as investors focused on OPEC talks and bte Q3 GDP +3.9%. Energy: $USO -2.5%, $XLE -1.6%. Europe $FEZ +0.6%.
Jamie Lissette
25 Nov 14 13:23:44
cme just put the FU onto $uso
Thu Real Matt
25 Nov 14 13:23:35
Sorry $XLE $OIH $USO $CL_F but your loss is and will be worlds gain, lower oil better for indices $SPY $QQQ $IWM $DIA #rotation
Selling_Options
25 Nov 14 13:17:41
@sellvol oops - WInning $USO :)
sellvol
25 Nov 14 13:15:11
@selling_options $USO ?
Gilbert MAHE
25 Nov 14 13:14:02
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/d3xnuPwvVK $CL_F $USO
Dan Chesler
25 Nov 14 13:13:25
$WTI $USO #hikkake looked good on Friday 11/21 after triggering hikkake entry on 11/20...but not so much today..back to the death spiral?
Shaun
25 Nov 14 13:10:05
Awesome close on oil today. Exactly what I was looking for. $SHORT $USO Good balance trade is sell $USO buy $UNG for the risk averse. $CL_F
Avery Withrow
25 Nov 14 13:08:01
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/d3xnuPwvVK $CL_F $USO
howardlindzon
25 Nov 14 13:05:20
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/d3xnuPwvVK $CL_F $USO
Teycir
25 Nov 14 13:04:33
$uso one more lower low, pattern is still bearish
Walter Live Oak
25 Nov 14 13:02:37
RT @TeycirTrades: $uso what if this drop is related to an OPEC no cut leak and that one bigger leg down is coming soon?
Bruce Leeroy
25 Nov 14 12:58:55
RT @RedDogT3: Oil which has been in a downtrend for most of this year is below pivot lows. That's $28.10 in the $uso. $xle & $oih continu…
Jeff Quiggle
25 Nov 14 12:54:00
They did it! Traders beat crude #oil etf $USO down to lowest price since April 2009 #wtic $CL_F
Teycir
25 Nov 14 12:53:16
$USO MFI bullish divergence, maybe some hope for bulls https://t.co/hXy7ELVM7o
Scott Redler
25 Nov 14 12:43:23
Oil which has been in a downtrend for most of this year is below pivot lows. That's $28.10 in the $uso. $xle & $oih continue to lag
TraderSmarts
25 Nov 14 12:43:08
Talking about the ticks! Could get all 3 highs again – may have a hard time doing it by exactly 5 ticks :) $CL_F $USO http://t.co/iBuEuDeLVc
TraderSmarts
25 Nov 14 12:41:37
Shorted all 3 highs exactly 5 ticks from each high ... couldn't do that again if I tried. $CL_F $USO http://t.co/5ZKSr1HkhT
Jennifer Whiskeyman
25 Nov 14 12:37:03
@BloombergNews Keep going I say. /CL $USO
TraderSmarts
25 Nov 14 12:33:59
Hit the oil trifecta today ... Tuesday November 25, 2014 $CL_F TS TradePlan Oil Review $USO $STUDY http://t.co/Fv6z1NmOBB
Yarazza
25 Nov 14 12:31:27
$oil $uso Energy sector hit hard by falling oil prices http://t.co/7AGjxoQXjw
Michael
25 Nov 14 12:30:14
$CHK $USO $XLE $COP Someone knows what OPEC is going to say! Big Put action today!
Parksani
25 Nov 14 12:29:20
RT @vicrek: The energy sector may be the next big trade, says MW's L.A. Little $XLE $USO http://t.co/JmwoDfBPVk
Mister_E
25 Nov 14 12:28:58
RT @RocksOptions: Some stocks are about to be hydraulically fractured. $USO
Zack Rock
25 Nov 14 12:26:39
Some stocks are about to be hydraulically fractured. $USO
Investing Insight
25 Nov 14 12:26:17
StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/Gc3tGPnwNe $CL_F $USO
RetailInvestorConf.
25 Nov 14 12:25:55
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/d3xnuPwvVK $CL_F $USO
Zack Rock
25 Nov 14 12:25:22
All time low happening in $USO ETF right now. Still remember oil spiking in 2008 and $USO going to $120. Now trading at $28...
Stockaholics
25 Nov 14 12:24:30
Our Platinum Penny Stock Pick On $STTK Is Up Over 128% This Morning. Huge News: http://t.co/MHaHGSIsXk $USO $EWP $CORN
From Philly We Fight
25 Nov 14 12:21:43
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/d3xnuPwvVK $CL_F $USO
Teycir
25 Nov 14 12:20:27
$uso what if this drop is related to an OPEC no cut leak and that one bigger leg down is coming soon?
Ben Moore
25 Nov 14 12:19:14
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/d3xnuPwvVK $CL_F $USO
Daniele Monigatti
25 Nov 14 12:17:05
RT @BorisALV: Crude Oil (WTI) on the move today. Down almost -2.5% to 73.91 bbl. (30-min chart) $USO http://t.co/upCZtiHAXE
Багира
25 Nov 14 12:16:30
RT @BorisALV: Crude Oil (WTI) on the move today. Down almost -2.5% to 73.91 bbl. (30-min chart) $USO http://t.co/upCZtiHAXE
Гламелия Гламелия
25 Nov 14 12:16:08
RT @BorisALV: Crude Oil (WTI) on the move today. Down almost -2.5% to 73.91 bbl. (30-min chart) $USO http://t.co/upCZtiHAXE
The_Real_Fly
25 Nov 14 12:16:05
OIL DOWN THE DRAIN FOR XMAS | Trading Algorithms with The Fly http://t.co/pTBBhwapZm $USO, $COH, $LULU
BA
25 Nov 14 12:15:47
Crude Oil (WTI) on the move today. Down almost -2.5% to 73.91 bbl. (30-min chart) $USO http://t.co/upCZtiHAXE
Jonathan Dyer
25 Nov 14 12:15:45
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/Z7MkWZt7lP $CL_F $USO
Neal
25 Nov 14 12:14:28
RT @SteadyTrader: $TLT breaks higher, $USO revisits recent lows, yet $SPY says meh, me no care #jaded
Cjwodetzki
25 Nov 14 12:14:21
RT @StockTwits: Crude oil is plunging again. Down 2.5%, and hitting its lowest levels since late 2010 -> http://t.co/d3xnuPwvVK $CL_F $USO
Hard Assets Investor
25 Nov 14 12:13:53
Market Wrap: Gold Inches Up As Dollar Declines; Oil Whipsawed By OPEC Rumors $GLD $USo http://t.co/hz2I5zUEHE
				
				
By  +Follow October 15, 2013 9:53AM
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