The following is an excerpt from Dimitra DeFotis | December 7, 2015 | Barrons.com |
As oil prices plummeted Monday, so did oil funds.
The iPath Goldman Sachs Crude Oil Total Return Index exchange-traded note (OIL) fell nearly 7%, the SPDR S&P Oil & Gas Exploration & Production exchange-traded fund (XOP) fell 6.8%, the U.S. Oil Fund (USO) fell nearly 6% and the Energy Select Sector SPDR ETF (XLE) fell 3.8%.
Michael Purves, chief global strategist and head of equity derivatives research at Weeden & Co. wrote the following after oil markets closed Monday afternoon:
“On the heels of the now-concluded December Organization of the Petroleum Exporting Countries meeting, the prospect for a near term fundamental shift in global crude supply seems all the less likely. The Iraqi oil minister’s statement that non-OPEC producers should start cutting back (instead of OPEC) on production suggests how fundamentally different OPEC is and likely to continue to be. The Saudi led “aggressiveness” almost echoes the 1970’s OPEC shock, just in reverse – and one which exacerbates deflationary problems as opposed to inflationary problems for the U.S. and other developed market oil importers. A few quick points follow on technicals, positioning and fundamentals. Net net, we think we are “lower longer” and $34 crude oil is a reasonable downside target for crude …
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