Crude Oil Leads A Broad Selloff

02-06-2010, 12:36 PM

02-06-2010

A steep drop in crude-oil prices triggered declines across the commodities spectrum, as investors nervous about the pace of the economic recovery gravitated back to the dollar.

People are buying the dollar," said Michael Gross, broker and futures analyst with OptionSellers.com. "Funds are liquidating everything else."

The week's wild commodity price swings underscore how investors aren't totally committed to betting that the world economy is on an upward track.

Commodities rose steadily last year in anticipation of strong growth in 2010; now, many investors fear commodities pose too big a risk amid the uncertain outlook.

In the meantime, markets are in flux—shooting higher on Monday and Tuesday on a few positive economic indicators, and tumbling on Thursday and Friday when the news turned sour.

"Volatility now is here to stay, it's something we're going to have to learn to live with," said Rick Mueller, director of oil markets at Wakefield, Mass., consultancy Energy Security Analysis.

The rush to the exits Friday began when oil prices fell below the 2010 low of $72.43 a barrel. Prices managed to bounce back from around that price three times in the past week, including during Thursday's steep slide. But on Friday, support crumbled amid concerns about weak oil demand in what is shaping up to be a slow economic recovery.

The breach triggered numerous automatic orders to exit trading positions many investors set up around certain price milestones. Within minutes, oil prices had tumbled to $69.50 a barrel, the lowest since Dec. 15.

Prices mounted a partial recovery, with the March futures contract settling at $71.19 a barrel on the New York Mercantile Exchange, down $1.95, or 2.7%. Crude is down 14% since the 2010 closing high of $83.18 reached on Jan. 6.

More than a million contracts changed hands Friday, roughly double the average daily volume.

Oil's slump acted as a cue for other commodities to follow suit. Copper sank to the lowest settlement since October, with the nearby February contract down 2.15 cents, or 0.8%, to $2.8540 a pound on Comex and the most active March contract down by the same amount to $2.8575 a pound. Gold followed, too, with the nearby February contract down $10.20, or nearly 1%, to $1052.20 an ounce. The most-active April contract also fell 1%, to $1,052.80 an ounce. The March ICE Sugar-domestic contract fell 1.47 cents, or 5.3%, to 26.17 cents a pound.

The dollar benefitted, at one point hitting the strongest point in eight months on the euro. A strong dollar tends to have a negative impact on dollar-denominated commodities.
"A lot of people piled in [the oil market] at the beginning of the year, and at the beginning of this week," when investors held a more-optimistic economic outlook, said Andy Lebow, senior vice president for energy with MF Global in New York. "There's a sense of uneasiness about … how robust the recovery's going to be."

The main concern this week was that tentative signs of economic growth will evaporate if governments begin to dial back stimulus measures. In Europe, investors fear Greece, Spain and Portugal will need deep spending cuts and other punishing fiscal measures to bring debts under control. The U.S. is grappling with its own deficits, making a repeat of last year's stimulus spending unlikely, while China began restricting lending last month to prevent high inflation.

In other commodity markets:

NATURAL GAS: Prices rose on forecasts for cold weather that is expected to increase demand for the fuel. Natural gas for March delivery rose 9.9 cents, or 1.8%, to $5.515 a million British thermal units on Nymex.

02-06-2010, 12:36 PM	#1
Gerrard مشرف منتدى الملتيميديا	Crude Oil Leads A Broad Selloff 02-06-2010 A steep drop in crude-oil prices triggered declines across the commodities spectrum, as investors nervous about the pace of the economic recovery gravitated back to the dollar. People are buying the dollar," said Michael Gross, broker and futures analyst with OptionSellers.com. "Funds are liquidating everything else." The week's wild commodity price swings underscore how investors aren't totally committed to betting that the world economy is on an upward track. Commodities rose steadily last year in anticipation of strong growth in 2010; now, many investors fear commodities pose too big a risk amid the uncertain outlook. In the meantime, markets are in flux—shooting higher on Monday and Tuesday on a few positive economic indicators, and tumbling on Thursday and Friday when the news turned sour. "Volatility now is here to stay, it's something we're going to have to learn to live with," said Rick Mueller, director of oil markets at Wakefield, Mass., consultancy Energy Security Analysis. The rush to the exits Friday began when oil prices fell below the 2010 low of $72.43 a barrel. Prices managed to bounce back from around that price three times in the past week, including during Thursday's steep slide. But on Friday, support crumbled amid concerns about weak oil demand in what is shaping up to be a slow economic recovery. The breach triggered numerous automatic orders to exit trading positions many investors set up around certain price milestones. Within minutes, oil prices had tumbled to $69.50 a barrel, the lowest since Dec. 15. Prices mounted a partial recovery, with the March futures contract settling at $71.19 a barrel on the New York Mercantile Exchange, down $1.95, or 2.7%. Crude is down 14% since the 2010 closing high of $83.18 reached on Jan. 6. More than a million contracts changed hands Friday, roughly double the average daily volume. Oil's slump acted as a cue for other commodities to follow suit. Copper sank to the lowest settlement since October, with the nearby February contract down 2.15 cents, or 0.8%, to $2.8540 a pound on Comex and the most active March contract down by the same amount to $2.8575 a pound. Gold followed, too, with the nearby February contract down $10.20, or nearly 1%, to $1052.20 an ounce. The most-active April contract also fell 1%, to $1,052.80 an ounce. The March ICE Sugar-domestic contract fell 1.47 cents, or 5.3%, to 26.17 cents a pound. The dollar benefitted, at one point hitting the strongest point in eight months on the euro. A strong dollar tends to have a negative impact on dollar-denominated commodities. "A lot of people piled in [the oil market] at the beginning of the year, and at the beginning of this week," when investors held a more-optimistic economic outlook, said Andy Lebow, senior vice president for energy with MF Global in New York. "There's a sense of uneasiness about … how robust the recovery's going to be." The main concern this week was that tentative signs of economic growth will evaporate if governments begin to dial back stimulus measures. In Europe, investors fear Greece, Spain and Portugal will need deep spending cuts and other punishing fiscal measures to bring debts under control. The U.S. is grappling with its own deficits, making a repeat of last year's stimulus spending unlikely, while China began restricting lending last month to prevent high inflation. In other commodity markets: NATURAL GAS: Prices rose on forecasts for cold weather that is expected to increase demand for the fuel. Natural gas for March delivery rose 9.9 cents, or 1.8%, to $5.515 a million British thermal units on Nymex.

أدوات الموضوع
مشاهدة صفحة طباعة الموضوع أرسل هذا الموضوع إلى صديق
انواع عرض الموضوع
العرض العادي الانتقال إلى العرض المتطور الانتقال إلى العرض الشجري

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