Oil prices are again at the cheapest point in six years. Oil fell sharply right after prices broke key support levels last month. The rebound in prices during the first half has already vanished, proving again that trying to fish out price bottoms in a falling market is not a good idea.
Pessimism is spreading among investors about China’s economy.
The Chinese stock market crash just two months ago already signaled that something was rotten in China. If that wasn’t enough, China devaluating its currency on Tuesday is only boosting many parties’ conviction that global demand can’t catch up with a continuous oversupply of crude.
The yuan’s plunge is also bearish for oil because it makes China’s oil imports more expensive, which means that, most likely, China is not going to come rescue the oversupplied global oil market anytime soon.
The latest data show that production is at historic highs in the US and OPEC lifted its total output in July to the highest level in three years. The cartel is responsible for more than a third of global oil production. Besides, the end of Iran’s oil export ban will likely only add volume to the already oversupplied market.
What This Means For Metal Buyers
Falling energy prices lower the cost of producing other commodities, adding more pessimism to the already bearish commodity market. Metal prices remain under pressure.