Crude oil seen sliding towards $50/barrel 7 Nov 2008, 1657 hrs IST, ECONOMICTIMES.COM With global stock markets and data releases giving a tame scenario for global growth, crude oil is seen heading towards $50 a barrel.
World's top 10 oil producers
International benchmark December contract on the New York mercantile Exchange
is currently trading near $61, after briefly breaching $60. Domestic November
future on MCX is trading closer to Rs 2980 per barrel.
According to Praveen Singh, research analyst, Sharekhan Commodities, weak
equity markets as well as negative outlook for global growth are the key
factors that give a negative outlook for crude oil prices. "While $62-60 range
was seen as a key support, a breach on the downside can take prices further to
$50. This could correspond to a price range of Rs. 2500-2450 for domestic
prices," he added.
Barring occasional pullbacks, all asset classes including stocks and
commodities have largely continued down moves. On Tuesday, December futures
rallied as high as $71.77 ahead of the US presidential election result.
However, in the last two sessions, prices have given away more than 13 percent
as further rate cuts from Bank of England as well as European Central Bank
failed to provide any support to negative market sentiment.
"It is evident from the recent data releases that global growth is expected to
decline significantly. While this would weigh on crude oil demand, investment
demand has also dried out due to the liquidity crunch," said Harish Gallipeli,
research head, Karvy Comtrade.
According to the International Monetary Fund's latest report released on
Thursday, it now expects 2009 global economic growth of 2.2 percent, down 0.8
percent from the forecast it gave in October. Prospects for global growth have
deteriorated over the past month and developed economies will likely contract
for the first time since World War II, it said.
"In this backdrop, international crude oil prices have a potential to decline
towards $50 if a support of $55 is breached," said Harish.
Earlier on Monday, the European Commission said that the economic growth in the
euro zone is expected to slump to 0.1 percent in 2009. It also said that
region's GDP could shrink for three consecutive quarters this year and cut its
forecast for full-year 2008 growth to 1.2 percent from 1.3 percent previously.
Comments from UK policy makers also continue to reflect that the country might
already have entered a recession.
Meanwhile, traders await the release of US October non-farm payrolls later
Friday. The employment report is expected to be crucial for financial markets
since another decline in the payroll would be a tenth consecutive contraction
in the job market of the world's biggest economy. The unemployment rate is also
expected to surge further from September's rise to 6.1 per cent, its highest
gain in five years. "Some cause happiness wherever they go; others whenever
they go."
- Oscar Wilde
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