IPE Brent futures fall as global commodities come under pressure

IPE Brent futures fall as global commodities come under pressure

London (Platts)--15May2006

IPE Brent futures in London continue to fall in trading on Monday as
global commodities come under pressure with inflation fears due to the weak
dollar and uncertainty over the direction of interest rates pushing crude
prices downwards, brokers said. There has been a rush to sell commodities as
traders worry over the health of the global economy.
"For once the price direction of crude is not being dictated by oil
matters it is a case of global commodities going down the pan," one broker
said.
At 1125 London time (1025 GMT) the front-month June IPE Brent futures
contract had fallen $1.67 from Friday's close of $72.32/barrel, trading at
$70.65/barrel. NYMEX light sweet crude futures are down a similar amount with
the contract for delivery in June down $1.70 trading at $70.34/barrel at 1125
London time.
"The crude feel good factor is coming under pressure but at $70/barrel it
is still a buy," he added. Technical factors leading to the falling value of
crude futures is the reduction in net long positions as large funds look to
offload positions onto smaller speculators who do not have the financial clout
to sustain the price of crude futures.
"The weak dollar is offsetting some of the high oil cost to the end
consumer but as well making for a further negative return for the foreign
investors/speculators holding length who have to add it to the cost of a
negative roll (contango) and flat price erosion," according to a Petromatrix
report released on Monday.
The fall in commodities prices has driven European stock markets lower on
Monday extending Friday's losses, with the FTSE 100 down -54.00 at 1106 London
time and the Dax down -74.63 with natural resources and commodities based
companies leading the fall.
In other news, the IEA released a report on Friday saying it now expected
global oil demand to rise by just 1.25 million b/d this year rather than the
1.47 million b/d it had forecast in its previous report. This news initiated
the softening in the price of crude futures but is more a peripheral factor in
terms of global events, and will act as an anchor on any potential recovery in
price, according to traders.
--Jonathan Davies, jonathan_davies@platts.com

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