Oil prices stabilised on Tuesday after falling for the previous four sessions while base metals made modest gains and gold traded in a narrow range above $920 an ounce as concerns about the global economy’s recovery prospects weighed on sentiment among commodity investors.
Disappointing US employment data for June, released last week, has been cited as the primary cause for subsequent selling across commodity markets.
However, analysts at Goldman Sachs said the sell-off was “simply a correction in a commodity rally that had run ahead of itself.”
Goldman noted that recent economic data had, in general, been mixed, as solid industrial news contrasted with disappointment on employment.
“While most commodity prices have moved lower, metals prices have held up relatively well, consistent with their higher leverage to the emerging economies, where economic data remains consistently better,” said Jeffrey Sachs, commodity strategist at Goldman Sachs.
In energy markets, Nymex August West Texas Intermediate rose 17 cents to $64.23 a barrel while ICE August Brent added 25 at $64.30 a barrel.
Traders’ attention this week should turn to demand forecasts from the US government with the Energy Information Administration due to release new data in its monthly report for July, due out on Tuesday, while the International Energy Agency, the energy watchdog of the developed world, will provide new figures in its closely watched monthly report on Friday.
The key issue for traders is whether the recent run of downward revisions to projections for demand growth has reached its end as the global economy begins to stabilise after an extremely sharp fall in output across the globe in the first quarter of the year.
In June, the EIA marginally increased its 2009 demand projection by 10,000 barrels a day to 83.68m b/d from May’s projection of 83.67m b/d, still 1.75m b/d, or 2 per cent below last year’s consumption of 85.43m b/d.
Mike Wittner, global head of oil research at Société Générale, said the direction of demand revisions was an important signal, as with other macro-economic indicators such as GDP.
Looking specifically at US data, Mr Wittner noted that final monthly demand figures for April showed upward revisions compared with preliminary weekly figures for the first time since last October.