It was another wild week in the commodities markets, with oil continuing to make big moves. Oil futures tumbled to fresh 28-month lows earlier in the week as traders continue to worry about an abundant supply. Crude fell more than 17% from a year ago, and members of OPEC still appear willing to accept the lower prices in the short term in an attempt to squeeze out U.S. production.
“OPEC’s Secretary General El-Badri has once again highlighted the apparent will of OPEC to accept a lower price in the near-term to squeeze out competitors over a longer period (read: US shale),” Matt Smith, Commodity Analyst at Schneider Electric said.
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Wall Street firms like Goldman Sachs also added to the selling pressure when it slashed its outlook for the oil-sector, calling for the U.S. benchmark West Texas Intermediate (WTI) crude to fall to $75 a barrel and Brent to $85 a barrel in the first quarter. Those forecasts are both down $15 from the previous levels. The revisions are good news for the U.S. consumer, as the cost of driving to work continues to fall. The national average for gas prices hit a mere $3.01 a gallon, according to AAA. That’s down 27 cents from a year ago.
It wasn’t just oil and equity markets that took a hit, the bears also took control of the gold market. The precious metal fell to a three-week low after the U.S. Federal Reserve announced the end of its bond-buying stimulus program that began in 2008. The central bank also expressed further confidence in the U.S. economy, causing gold to lose its allure as a safe haven asset.
On the agriculture front, soybeans pushed higher for much of the week as traders focused on a drought in Brazil that could reduce planting as well as supply issues. But some traders say the market is overbought, and selling could take hold in the near future.
“It is only a matter of time, in my opinion, that the pipeline supply issues which is creating all this demand, is all worked out,” Lannie Cohen, President of Capitol Commodity Services said. “Open interest has dropped drastically over the last two days, indicating this is a short covering rally.”