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Hansen: Fear drives oil close to seven-year low

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After OPEC’s indecisive meeting last week, attention turns to the US. Later this Wednesday inventory numbers are released. Saxo's Ole Hansen says that once again the market expects a small rise, even though numbers should be falling at this time of year. The price of WTI crude is now at a near seven-year low.

The first quarter of 2016 will be key, says Hansen, particularly as Iranian production picks up. He wonders whether Saudi Arabia will try to match its rival barrel for barrel.

But can China and even the US motorist help stop the rout? Ole says both have been using more gasoline and buying more cars. Furthermore, the Chinese government is continuing to buy strategic oil reserves as the price continues to fall.

Ole also discusses contango in the market - that's the discount at which spot oil is trading. While the contango in WTI continues to widen in Brent it has narrowed. This could signal that the supply glut isn't as great as feared. However, Ole says that the market's reaction to fear and what might happen is still driving the market down.