Crude oil is crashing.
On Monday, West Texas Intermediate crude oil, the US benchmark, fell more than 6% to trade as low as $30.99 a barrel, the lowest since at least December 2003.
Brent crude, the international benchmark, was off over 6% on Monday to as low as $31.90 a barrel, also a 12-year.
The slide comes as oil continues to get pounded to start the year and simply can’t catch a bid with a 5% daily decline seemingly becoming the new normal.
Following oil lower were US stocks, which were down across the board on Monday and making new lows near mid-afternoon.
At around 1:55 p.m. EST, the Dow was off by about 90 points, the S&P 500 was down 18, and the Nasdaq was down 62 points as tech stocks were taking the hardest hits.
The drop on Monday follows commentary from analysts at Morgan Stanley, who in a note to clients said that oil is now in “uncharted territory.”
In its note, Morgan Stanley said that it expected the current collapse in energy prices wouldn’t be as severe as what was seen in 1986. As it turns out, this crash is far worse and things aren’t likely to turn around anytime soon, either.
Here’s Morgan Stanley (emphasis ours):
A quick end does not appear to be in sight either: OPEC continues to produce “at will,” Iran could increase exports in coming months if sanctions are eased, risk to exports from Libya are skewed to the upside, and the end of the export ban in the US makes elevated inventories in the Lower 48 available globally. Moreover, demand is likely to decelerate given the brittle outlook for economic growth, particularly in emerging markets, and our house view calls for continued dollar strength, which has weighed on oil prices throughout this downturn.
Last week, the biggest news in oil markets was a report suggesting that Saudi Arabia’s state-owned oil giant Saudi Aramco — which is likely by far the world’s largest company — could be going public in some way.
The quick reaction is that this makes no sense for the kingdom, with oil near multiyear lows, though on closer examination this move clearly indicates some anxiety from Saudi Arabia about the future of oil and, as a result, its financial condition.