Oil down as overheated commodity markets slip

OIL PRICES slid more than $6 yesterday as traders lost confidence in last week's surge to more than $146 a barrel.

In volatile trading, crude futures came under pressure from a stronger dollar and worries that last week's rises were overdone.

Crude was on track for its biggest one-day fall since the start of the first Gulf War in January 1991 when the US moved to calm world markets by releasing 70 million barrels from its reserves.

August Brent crude yesterday fell $5 to $136.78 a barrel, extending a $4 slide in the previous session. At one point, Brent was down more than $6 to $135.50. Last Friday, it hit a record $146.69 a barrel.

Nymex August West Texas Intermediate lost $5 to $136.35 a barrel, having shot to a record $145.85 on Friday.

"Prices had moved too far, too fast," said Kevin Norrish of Barclays Capital, arguing that the fall reflected short-term volatility rather than long-term change in supply and demand fundamentals.

Traders put the move down to suspicions that the dollar, in which oil is priced, had overcome its weakness, as well as a perceived easing of tensions in the Middle East.

Base metals also saw heavy selling. Aluminium, which jumped to a record high on Monday, saw its gains wiped out as it fell 4.9 per cent to $3,150 a tonne. It had soared in the previous session as power shortages in China forced smelters to cut production of the metal. Those worries crumbled yesterday as traders sold base metals across the board. Copper lost 3 per cent to $8,193 a tonne, retreating further from last week's record high, while nickel was down 1.7 per cent at $20,600 a tonne.

Agricultural commodities weakened, with July corn down 35 cents to $6.81 a bushel while July wheat slipped 9 cents to $8.13 a bushel.

- (Financial Times service)

This article appears in the print edition of the Irish Times