The New York Times today said "the price of oil plunged."

Descent, landslide, plummet, tailspin – whatever you call it, the price of oil took a significant dive today.

As stated in today's New York Times article, "Market Wavers as Oil Prices Drop," Nate Thooft, head of global asset allocation for Manulife Asset Management, noted that stocks and oil prices had often traded in tandem this year. "Where oil goes, stocks go," he said. "Oil fell dramatically pretty quickly."

According to Bloomberg Energy, WTI Crude Oil settled today at $45.31 per barrel and Brent Crude Oil closed at $46.40 per barrel.  Brent Crude took an almost 5% dive – down 4.92%.

An Oil & Gas 360 article this evening, "Oil Price Falls Hard on Inventory Report," discusses the decline in detail.

  • What is the cause of the price of oil sliding?

The Oil & Gas 360 article states that the cause was the U.S. Energy and Information Administration ("EIA") Petroleum Weekly Status Report which "reported Thursday morning that domestic crude oil supplies declined by 2.2 million barrels."  This was reportedly the 7th straight weekly fall for crude stockpiles.

The New York Times also noted that "stocks fell after the EIA said crude inventory shrank last week by 2.2 million barrels."

  • Oil supplies declined...so why did the price drop almost 5% today?

The draw on oil inventories was basically not as high as people were expecting – the decline in supply was not enough.

Analysts reportedly expected a bigger drop in inventories...

The American Petroleum Institute ("API") reportedly had shown a draw on oil inventories of 6.7 million barrels, but the EIA data reflected a "smaller than expected drop."

The Wall Street Journal reported: "Oil Prices Sink to Two-Month Low: Crude Inventories Declined Less than Expected in Latest Week."  The Wall Street Journal also cited a stronger dollar weighing in on oil prices – stating that "[a] stronger dollar can make oil, which is traded in dollars, more expensive for buyers using other currencies."  The Wall Street Journal also reported that "some analysts said the oil-price decline was an overreaction" and that the market simply "got it wrong" this time.

I sure hope so...

  • Are there any other potential causes for the drop?

The other big cause according to the Oil & Gas 360 article – the flipside to supply is demand – "concerns of a slowdown in demand for crude oil."

Many report that Brexit could also impact oil demand.

Here's hoping that we see the prices stabilize...

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