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Oil has no reason to melt down: energy analyst

Worries about China and near-record production from OPEC and the U.S. have knocked oil prices below $40 a barrel. But one energy analyst thinks the markets may have beaten up crude a little too much.

Oil has fallen by a third in the past month and a half, with the price of crude tumbling some 7% in the last five days alone. Bad economic data out of China and the country’s subsequent devaluation added to concerns that there’s more supply of oil than demand in the markets.

Data from the U.S. Energy Information Administration show American production at 9.4 million barrels per day, still close to its all-time highs of 9.61 million barrels per day set in June. OPEC production is at 31.5 million barrels per day, which is a 3-year high.

However, Pavel Molchanov, energy analyst at Raymond James, maintains nothing has happened in the past few days to merit such a steep selloff.

“Nothing happened in the oil market in the last 24 hours or 72 hours to cause this kind of meltdown other than just sentiment on all commodities and all equities being so negative right now," he said.

He continues to hold his $55 per barrel price target for West Texas Intermediate crude (CLV15.NYM) and $62 for Brent crude (BZX15.NYM).

Molchanov dismisses the...