Oil sinks despite geopolitical turmoil overhang

LONDON (August 5) Oil prices are sinking over 2% on Monday, with markets not getting a break after the turmoil at the end of last week. The Japanese stock market performance was a sign on the wall with its worst performance since 1987, with the Nikkei index sliding over 12% lower. Markets are scared that demand will start to shrink from here after a trifecta of very disappointing US data last week lit the fuse around recession fears. 

Meanwhile, the US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, is receiving one gut punch after another. In normal risk-off movements, the Greenback is considered to be the safe haven. Though, as it is the same US data that is sparking that risk-off, it does not make sense as an investor to hold on to that cash anymore and park their investments in safe bonds, with the outlook that those high yields are soon to come to an end after US Federal Reserve Chairman Jerome Powell opened the door for an interest rate cut in September. The question for this week is if markets are over-exaggerating, and this is an ideal buy-the-dip moment on all fronts. 

At the time of writing, Crude Oil (WTI) trades at $71.42 and Brent Crude at $75.19

Oil news and market movers: Do not forget the background

• Although Oil prices are selling off, Saudi Arabia is convinced that Asia will continue with growth and demand, and hikes its prices for that region for the first time in three months, Bloomberg reports. 
• Libya has started cutting production at its Sharara operation by at least 50,000 barrels per day to only 210,000, Reuters reports.
• Vortexa data shows that the amount of Oil afloat in tankers has fallen 31% from last week, which could point to a recent pickup in demand. 
• Overall, commodities are following suit with the global selloff, though losses look rather limited in the commodity space against the bigger losses in equities. 

FXStreet