Oil prices continue to tumble.
The price of a WTI crude oil fell to as low as $29.96 per barrel. This is the first time the price crossed below $30 since December 2003.
It happened in the blink of an eye before bouncing back a bit.
Falling oil prices seem to reflect a simple story of supply and demand. Supply is high with the US fracking tons of crude out of its robust shale basins and Middle East producers refusing to cut production significantly. Demand has been cooling with the global economy decelerating.
There’s also the strong dollar, which is known to move in the opposite direction of dollar-denominated commodities.
Meanwhile, stock prices are down again. The Dow is down 60 points (0.3%) and the S&P 500 is down (0.4%).
The stock market and oil market have been moving in tandem as unusually low oil prices have been devastating to the bottom lines of the energy sector. Estimates for Q4 earnings having been coming down in recent weeks, largely due to the persistent weakness in the prices for commodities like oil. Stock market strategists at Goldman Sachs, Deutsche Bank, and RBC Capital Markets have all recently warned their clients about these risks.
“We expect [the energy sector of the S&P 500] will post a $2 per share loss in 2015 EPS, the first time that [last-twelve month] Energy EPS has been negative since our data series began in 1967,” Goldman Sachs’ David Kostin said. “The write-down in Energy company assets has exacerbated the earnings hit from the 35% fall in Brent crude oil prices in 2015 following a 48% plunge in the commodity price in 2014.”