As if this year hasn’t had enough reasons to sell the market, OPEC and Russia added another on Friday with the breakdown of oil output negotiations.  Saudi Arabia has effectively declared a price was as a result and will no longer throttle output.  And the oil market has responded aggressively.  Let’s look at April Crude Oil futures, which have dropped ~50% since the beginning of the year:

With this kind of drop in oil prices, a number of companies are being impacted for the worse.  Simply look at US Oil Producers, using the ETF XOP as a proxy:

We’ve had a year filled with panic-inducing news, and with the market already on edge, we added another straw to the camel’s back today.  The coming days will help us understand if this was the final straw to break the whole camel’s back, or if the bear is running out of news to keep pressing the markets lower.  What we can say for sure is that now is a time to be on our toes and look for opportunities, but understand that markets can be irrational in these kinds of environments.  And with liquidity in equities and options limited, this is not an easy market to trade, that’s for sure.


Keith Harwood