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Portfolio > Alternative Investments > Commodities

Oil Explorers Tumble as Commodities Bloodbath Sinks Markets

By Joe Carroll, Bloomberg

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Oil and gas producers dropped to their lowest level in almost four years as collapsing markets in China heightened concern that demand will falter in the world’s second-largest destination for crude, aggravating a glut from North American shale and the Persian Gulf.

An index of 40 energy explorers declined 3.7 percent at 10:30 a.m. in New York trading, after earlier tumbling as much as 5.5 percent to the lowest since October 2011. Exxon Mobil Corp. and Chevron Corp., the biggest U.S. oil companies, racked up losses of as much as 8 percent shortly after domestic equity markets opened on Monday.

Stocks around the world plunged as a rout that began with the Aug. 11 devaluation of China’s yuan rippled through European and U.S. markets. Commodities fell to a 16-year low, Treasury yields dipped and U.S. crude fell below $38 a barrel for the first time since February 2009.

“It’s a bloodbath,” said Mark Hanson, an analyst who follows U.S. crude explorers at Morningstar Inc. in Chicago. “We’re at an intersection of a lot of bad news.”

Market Turbulence

Some of the biggest losers in the Standard & Poor’s 500 Energy Index included shale oil pioneer Continental Resources Inc., which plunged as much as 25 percent, and Anadarko Petroleum Corp., which dropped as much as 16 percent. Crude futures for October delivery declined 4.2 percent to $38.76 a barrel at 11:18 a.m. in New York after earlier dipping to $37.75.

Deal activity among energy-focused investment bankers and project financiers screeched to a halt as potential investors eyed the market turbulence and sat on the sidelines, said Christopher Geier, partner-in-charge at Sikich Investment Banking in Chicago.

“The guys who are looking to invest money get really nervous when they see the markets turn like this,” Geier said. “Sitting on cash and doing nothing seems to make them feel better.”

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