Oil hit an eight-month high yesterday before suffering a sharp reversal as fickle investor sentiment flickered in the face of negative economic data from the US.
Such volatility in the energy markets defied predictions for a docile trading week cut short by US Independence Day, with crude breaching $73 a barrel during Asian trading before stumbling back below $70.
Weaker-than-forecast US consumer confidence data and the dollar rising against the euro were seen by some as prompting the later falls, while others argued that the unusually high trading volumes overnight in Asia were evidence that large investment funds had been changing their oil positions for the end of the quarter, causing a temporary price rise.
Nevertheless, crude was still on track to register its largest quarterly gain since 1990, having risen by almost half since February as investors, stung by the precipitous falls in commodity prices in the second half of last year, scrambled for exposure to any recovery, with oil and base metals seen as the most sensitive proxies.
Barclays Capital argued that the surge in energy, metals and agricultural products that has pushed the Reuters/Jefferies CRB commodities index up 25 per cent since the start of March marked a “revolution” in how investors view the commodities cycle.
“The usual relationships between commodities prices and the economic cycle [have] been redefined,” Barclays Capital said in its summer 2009 outlook.
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posted by srikanth....july1
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