The Daily Prophet: Wall Street Has a New Parlor Game

How low can it go? The price of oil, that is. Crude is in free fall, approaching $42 a barrel today, from $52 as recently as late last month, and it seems like almost everybody has an opinion on where the bottom is. There's no shortage of pundits saying prices could easily fall below the $30s a barrel.

Not even a drop in U.S. stockpiles was enough to dispel the pessimism that has struck the market this month as American supplies remain stubbornly above their seasonal average and production keeps rising. "This is like a falling knife -- wouldn't catch it right now," Amrita Sen, the chief oil analyst at consulting firm Energy Aspects in London, told Bloomberg Television. "We've had people call us and say this is the worst they've seen sentiment in 20 or 30 years. Right now, fundamentals don't really matter."

The ripple effects run wide. Currencies of oil-producing nations such as Russia are tanking, sovereign-debt markets are jumping higher as traders downgrade their inflation forecasts, and the energy-heavy junk bond market is wobbling. A wave of equity analysts cut dozens of oil-industry stocks on Wednesday, as views of the world’s ability to soak up a global oversupply turn increasingly pessimistic, according to Bloomberg News' Alex Nussbaum. Seaport Global Securities downgraded 51 explorers and oilfield service providers, including Apache, Continental Resources and Devon Energy, warning that crude could plunge below $30 a barrel next year. Barclays and Morgan Stanley slashed estimates for Schlumberger and the rest of the services industry, citing the potential for as much as a 50 percent drop in stock values. Big Oil wasn’t spared. Analysts at Macquarie Capital cut Royal Dutch Shell, Chevron, Eni and BP, warning the companies may require “further, painful cost reductions" if prices keep slipping. Capital One Securities cut Hess and three other exploration and production companies.