Crude oil opened down 1.7% on Monday as investors were rattled by more negative news from the Ukrainian front. Although an apparent ceasefire was reached, fighting near two flashpoint cities in East Ukraine broke out less than 48 hours after the agreement. The fighting has forced Western nations to threaten additional sanctions against Moscow. Investors will continue to keep a close eye on the conflict as Russia is the second largest oil producer in the world.
Oil has dropped over 13% from its yearly high reached in late June of this year. Disappointing Chinese and European data stopped the recovery attempt Oil investors made last week and lower prices appear to be coming. Poor Chinese factory output numbers showed that China, the number two consumer of oil in the world, may be entering a cyclical decline thus lightening demand.
Oil tends to follow a pattern of peaking in the middle of summer followed by a weak 2 – 4 months before continuing up. While this drop may be cyclical in nature, economic and political concerns continue to keep investors on their toes.
We will continue to watch for a bottom in $OIL as it tries to hold near its 52 week low at 21.30.
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