Crude Oil Bears Run Rampant as Bullish News Ignored: Russell

SEATTLE (Scrap Monster): The response of crude oil markets to a series of developments this week shows how the bearish mindset is dominating the narrative.

News that should be positive for oil prices is largely discounted and ignored, while factors that add to negative sentiment are embraced and reflected in price movements.

Global benchmark Brent futures show this dynamic, with the front-month contract dropping 4.9% on Tuesday to end the session at $73.75 a barrel.

This was the lowest close in nine months and extends a downtrend that has been in place since July 5, when Brent ended at $86.54 a barrel.

The immediate catalyst for the sharp fall on Tuesday were reports that the various parties vying for control in Libya have reached an agreement that may lead to the resumption of crude exports from the North African producer.

Libya's legislative bodies have agreed to appoint a new central bank governor within 30 days after U.N.-sponsored talks, a statement signed by representatives of those bodies said on Tuesday.

Libya's crude exports at major ports were halted on Monday and production curtailed across the country, the latest moves in an ongoing standoff between rival political factions over control of the central bank and oil revenue.

The Libyan National Oil Company has confirmed that actual production has slumped, dropping to little more than 591,000 barrels per day (bpd) as of Aug. 28 from nearly 959,000 bpd on Aug. 26, and as much as 1.28 million bpd on July 20.

This is a real cut to the volume of oil available to global markets, but the price reaction to the news on Monday was at best muted, with Brent actually ending the day slightly lower than the previous close.

But news of a potential deal that is several weeks away, and doesn't restart oil output immediately, is enough to send oil prices down by almost 5%.

That alone shows that the market is currently seizing on bearish news and amplifying it, while discounting any bullish developments.

Courtesy: www.reuters.com