Oil plunges 3.5% again – Below $100 and Brent

LAST UPDATE 17:50

Sellers re-emerged in oil, which not only erased morning gains in the wake of the end of the strike in Norway, but is now also sharply lower with further heavy losses after yesterday’s dive.

In particular, Brent futures are now down 3.8% at $98.8 a barrel, having lost almost $4 since yesterday’s close and $7 intraday, from a high of $105.85 in the morning hours with gains more than 3%.

Similarly, WTI is also losing 4.3% to trade at $95.2 a barrel, having lost $4.3 since yesterday and also 7 intraday from a high of 102.14.

After a bullish reaction in the morning, analysts estimated that yesterday’s plunge would not be continued.

“Today is something of a reset. There is no doubt that there is short covering and that investors are coming,” said John Kilduff of Again Capital.

“The fundamental story about tight supply globally remains. The sell-off was definitely overdone,” he said.

For his part, OPEC Secretary-General Mohammad Barkindo said the industry was under “siege” due to years of under-investment, adding that shortages could easily ease if extra supplies from Iran and Venezuela were allowed.

Former Russian President Dmitry Medvedev also warned that a proposal by Japan to cap the price of Russian oil to roughly half of current levels would lead to significantly less oil on the market and drive prices above $300-400 the barrel.

On the other hand, the Norwegian government intervened to end an oil industry strike that had reduced oil and gas production, the head of the labor union and the labor ministry said, ending a stalemate that could have worsened the Europe’s energy crisis.

By Saturday, the strike would have reduced daily gas exports by 1,117,000 barrels of oil per day, or 56% of daily gas exports, while 341,000 barrels of oil would have been lost, Norwegian Oil and Gas said.

However, concerns about an impending recession appear to be dominating the market. According to some early estimates, the world’s largest economy, the US, may have contracted in the current April-June quarter. If it does happen it will mark the second straight quarter of contraction, which is considered the definition of a technical recession.