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The worst thing is still to come in energy markets



It has been a tough week for the stock market across the board, but it is a sector that is hurting more than anything else. The only sector currently in the bear market is the energy sector, which fell more than 6 percent at the beginning of the month, making it the worst performer on the S&P 500 index.

While this already seems like a worst for investors, some analysts say things will actually continue to get worse for global energy markets. A key factor causing the decline, at least in part, is a new escalation of the now more than years-long US-China trade war, which warmed to new levels last week when US President Donald Trump tweeted that he would introduce a further 1

0 percent tariff on another $ 300 billion Chinese goods starting September 1.

China retaliated quickly, predictably, following the model followed by both sides of the trade war since its inception last year, letting its tightly controlled currency fall to its lowest value in over a decade, worsening trade tensions between the two countries by making Chinese goods more affordable for American markets, and conversely, making American goods more prohibitively expensive for Chinese consumers. In an article on this week's worsening tensions between the US and China, Forbes pointed out that "the US Treasury Department has since officially designated China as a" currency manipulator "- an act it has not taken since the 1990s when China was also appointed." Related: Energy Storage Boom Goes Into Overdrive

“The US-China trade war has always been serious. Now it's starting to get scary, ”reported CNN Business, where they had no words about the uncertainty in the US market going forward.

One of the many immediate effects of the deteriorating US-China relationship was the deflated price of crude oil, which made waves throughout the energy trade. Immediately after Trump's Thursday tweets announcing September 1 recently escalated tariffs on China, oil prices fell immediately by 8 percent, while oil producers' shares also fell, some by more than 10 percent "in what was" the biggest single drop in oil prices they last three years, "according to a report by Forbes.

And surfing will only get rougher in the future. Speaking to CNBC on Monday's edition of "Trading Nation," head of technical analysis at worldwide brokerage and investment bank Oppenheimer Ari Wald, said: "It's a strong trend and a bad risk reward. […] The sector just hasn't been rewarded CNBC uses West Texas crude to exemplify this trend, pointing out that the region's crude oil "has risen more than 110 percent since its bottom in 2016. During that period, XLE energy ETF added just 19 percent. ” Related: Big Oil Profits Team Despite Rising Production

Oppenheimer Wald went on to say that the sector's largest share Exxon Mobile is also projected to continue a downward trend , in an event turn that will certainly have a negative impact on the energy sector as a whole. ”Exxon Mobil [is] swinging lower from the bearish angle to the 200 day slide We define it as a resumption of the downtrend, "Wald said. "When you have the largest stock in the sector that acts as headwind in what is a broad list of bearish trends in this sector, we recommend underweight, avoiding and staying away from energy," he continued to tell CNBC. [19659002]

As of Tuesday, crude oil at a six-week low with Bank of America agreed with forecasts that the oil and energy markets will only get worse before they improve, "warns that $ 30 a barrel could be over the horizon after China's tough stance on sanctions, according to CNBC, the report went on to emphasize, soberly, that "these are recession rates, if they occur."

By Haley Zaremba for Oilprice.com

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