It’s been a wild ride for the markets this first week of January. As volatility in China’s stock market weighs on investors, crude prices are threatening to tumble below $30.
The oil market doesn’t have many bullish catalysts at the moment; there are fears of a declining demand in China, concerns regarding refinery maintenance and Iranian barrels are soon to hit the market, said Helima Croft, a senior strategist for RBC Capital Market.
“Do the fundamentals support oil in the $20s right now? Probably not,” Croft said, speaking in an interview with CNBC’s “Power Lunch” on Friday. She noted that macro-headlines could take the market anywhere.
Energy stocks weighed as WTI struggled to hold the $33 level. U.S. crude settled down 11 cents, at $33.16 a barrel, and the U.S. oil rig count showed a decline of 34 from last week, Baker Hughes said.
Still, oil’s hit a short-term bottom, said Lawrence McDonald, Societe Generale’s head of U.S. macro strategy. He argued that these are classic bear-market rallies.
“Bear market rallies can be amazing, you could get 20, 30, 40 percent rallies,” McDonald said. “I think there’s a high likelihood of another one.”
In the same vein, Croft considers that barrels off the market may lead to a surge in the energy sector.
“I think we need to see something pretty major out of Saudi, out of Iran, to get people excited about oil,” she suggested.