Speculators cash in to send price of crude lower

Commodities prices on Monday fell from recent highs on profit-taking after speculators began to liquidate their record bet on surging prices, particularly in the energy complex.
Oil tumbled more than $2 a barrel to its lowest for nearly three weeks, with worries that the credit turmoil could slow down the US economy adding to the negative mood. Expectations that the hurricane season might not be as bad as feared also contributed to the losses, analysts said.
In late afternoon London trade, Nymex September West Texas Intermediate was down $3.42 at $72.06 a barrel while ICE September Brent fell $3.58 to $71.17 a barrel – the lowest levels since mid-July.
Nymex September RBOB gasoline fell 6.11 cents to $1.9679 a gallon – the lowest since April. Nymex September heating oil dropped 5.7 cents to $1.9774 a gallon.
Non-commercial net long positions on the Nymex oil contract – speculative bets on higher prices – in the week to July 31 were at an all-time high of 127,941 contracts, according to the US Commodity Futures Trading Commission. The record bet on surging prices came just one day before the Nymex WTI price touched an all-time high of $78.77 a barrel.
Barclays Capital said that given the large size of speculative long positions in the market, further downwards pressure in the short-term cannot be ruled out.
Harry Tchilinguirian, of BNP Paribas, added: “The question is whether the accumulation of this length will unwind as it did in 2006 when it had reached comparable levels.”
In August last year, oil prices plunged by about $20 a barrel just a few weeks after surging to $77.40 a barrel on fears of an escalation of the Israeli-Lebanon war and with speculators betting on higher prices.
The large drop forced the Organisation of the Petroleum Exporting Countries to convene an emergency meeting and to agree to cut its output.
Gold prices slid $1.05 to $671.85 an ounce troy, in spite of renewed US dollar weakness against the euro. Silver was little moved at $12.93 an ounce troy while platinum rose to $1,292 an ounce troy, from $1,281 last Friday.
Base metals were mixed, with lead plunging more than 6.5 per cent after surging recently to an all-time, but tin rose 1 per cent $16,150 a tonne level, close to last week’s record.
London Metal Exchange lead fell 6.2 per cent to $3,086 a tonne but is still up 90 per cent since January. Copper was flat at $7,675 a tonne while aluminium moved 0.6 per cent lower to $2,653 a tonne. UBS said in a report: “In an environment where equities are weak and investors are clearly worried about the fall-out from the US housing market woes it is hard to make a case for firmer near-term base metal prices barring exceptional circumstances.”