Crude oil and related ETFs continued to fall deeper into bear market territory Tuesday as traders shunned anything with a hint of risk.
On Tuesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, declined 7.3% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, decreased 6.8%, both breaking into new one-year lows.
Meanwhile, WTI crude oil futures were 7.5% lower to $52.9 per barrel and Brent crude fell 7.4% to $61.8 per barrel.
Crude oil prices extended their rout Tuesday, falling below the one-year low of $55 per barrel that was reached last week on concerns over increased global oil supplies, along with slowing demand due to a weaker global economy.
“The same old adage applies…Too much supply, not enough demand,” Matt Stanley, a fuel broker at StarFuels in Dubai, told CNBC.
Risk-off sentiment
Oil traders may also be following the risk-off sentiment in the broader market as equities continued to weaken.
“We’re following equities,” Peter Cardillo, chief market economist at Spartan Capital, told the Wall Street Journal. “The market had found a floor over the past couple days, but today with equity markets continuing to move toward bear-market territory, nothing isn’t fair game.”
Oil prices have previously hit multi-year highs in mid-2018 after President Donald Trump withdrew from the Iran nuclear deal, which reinstated sanctions against the Middle Eastern country’s crude exports. Iran’s oil shipments have since declined by over a third and analysts expect more than a million barrels per day could be cut off from the market by the first quarter of 2019.
“We are entering an unprecedented period of uncertainty in oil markets,” International Energy Agency executive director Fatih Birol said at a conference in Norway, according to Business Insider. The IEA has already warned that Trump’s Iran sanctions could make maintaining global supply “very challenging.”
Some analysts, though, argue that energy traders were following market momentum as many dumped crude futures in favor of natural gas contracts, which have surged 40% over the last month on the colder-than-expected weather outlook.
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