WTI crude oil just broke $US60 for the first time since July 2009.
Earlier on Thursday, WTI went as low as $US60.09 before bouncing back, though WTI was still volatile all day. And in afternoon trade on Thursday, oil broke down, making a new multi-year low.
US stocks followed oil lower on Wednesday, with the Dow falling 268 points and the S&P 500 having its worst day since October. On Thursday, however, US stocks were surging higher with the Dow adding as many as 200 points.
After oil touched new lows, however, US stocks were paring some gains, with the Dow up about 150, the S&P 500 up 20, and the Nasdaq up 55 near 2:15 pm ET.
The drop in oil on Thursday comes after what has been a terrible two weeks for oil, which started its most recent leg lower on Thanksgiving Day after OPEC declined to cut production in an effort to battle declining oil prices.
And on Wednesday, Saudi oil minister Ali Al-Naimi said to reporters, “Why should I cut production?” Al-Naimi chalked up the swings in oil prices to the way that market treats commodities: “It goes up and down and up and down,” Al-Naimi said.
As Business Insider’s Shane Ferro noted on Wednesday, it was an interesting comment from Al-Naimi, as ostensibly the point of OPEC is to control oil prices given that the group is an economic cartel.
The decline in oil over the last few months — which has seen WTI and Brent crude prices fall more than 40% — has had many wondering about the “breakeven” price for oil drilling projects all over the world. The “breakeven” price is the price at which a project is deemed economically feasible.
On Thursday, we highlighted research out of Morgan Stanley that said the “cash cost” of oil production, not the “breakeven” price of projects is where the market should be focusing, as cash cost is basically what it costs to keep oil production going, not what it takes to make a project profitable or economically attractive.