Oil prices nosedived by $10 early this month as the US stock market crashed due to fears of a recession. Over $2 trillion worth of funds were wiped away in three days, leading to extreme fear gripping the markets.
In the last 30 days, the West Texas Intermediate (WTI) fell from a high of $85 to a low of $75. Oil prices were among the worst hit in the commodity markets, and a quick recovery from here looks impossible.
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So why did oil prices crash and fail to rise when the US stock market dusted itself up from the fall? In this article, we will explain why oil prices fell by $10 in a month, wiping away investments in an instant. They are now down to their six-month low and could take months to reach the $85 mark.
3 Reasons Why Oil Prices Fell $10 In a Month
While we’ve already mentioned that oil prices dipped $10 a month due to the stock market crash and fears of a recession, many other factors led to its decline.
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The three other factors that made oil prices plummet by $10 are:
- Escalated conflict in the Middle East between Iran, Palestine, and Israel.
- The stock market crash spilled over to the commodity markets.
- The heightened fears from investors to take an entry position now are making oil prices trade sideways.
Daniela Sabin Hathorn, Senior Market Analyst, explained that investors overreacted when the stock markets crashed. Now that the markets are experiencing gains, oil prices could begin to recover slowly.
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“US crude (WTI) pulled back to a 6-month low on Monday as fear took over in markets, with the Japanese Nikkei experiencing the worst performance in 40 years. As tends to happen when sentiment takes over, we saw some overreaction in the moves which led to a correction later in the session, supported by stronger ISM non-manufacturing data which helped to calm some of the nerves,” she said.