ET: Oil Price Falls As World Bank Downgraded Economic Outlook
Crude oil price extends Friday's decline and slide to 69.2 in Asian session. While gasoline demand worries continue to haunt, World Bank's forecast downgrade and USD's strength are key factors pressuring price lower.
The World Bank revised its forecasts on global economic growth to -2.9% in 2009, down from -1.7% from March's projection, following a +2% expansion in 2010, also lower than +2.3% estimated in March. The report stated that 'while the global economy is projected to begin expanding once against in 2H09, the recovery is expected to be much more subdued than might normally be the case...unemployment is on the rise and poverty is set to increase in developing economies'.
The lender showed much concerns about the growth in emerging economies. With exceptions in China and India, GDP in other developing countries are expected to contract. On net, only a modest +1.2% growth will be seen in developing nations this year, after +8.1% and +5.9% expansions in 2007 and 2008 respectively.
USD rises against major currencies except Japanese yen as deteriorated political conditions in Iran raises investors' for safe assets. Moreover, the market anticipates that the Fed will deliver a less dovish statement after the FOMC meeting Wednesday in light of strong economic data released recently. However, we believe the Fed will need to reinforce the stance of keeping interest rate low until we see solid evidence of economic recovery. This may turn down some USD bulls who speculate a rate hike in late 2009.
Currently trading at 934, the benchmark futures for gold remains in consolidation as the dollar rebounds and other investments such as bonds and stock gain interest. Investment demand had been sluggish and gold holdings in the SPDR Gold Trust stated at 1132.15 metric tons since June 5. Net speculative long positions in gold futures also dropped for the first time in 8 weeks last week. Silver price also plunges -1% to 14.05.
Commitments of Traders
Crude Oil: Net speculative long positions declined to the lowest level in 5 weeks after a strong rise in the prior week.
Natural Gas: Net shorts in US natural gas climbed to the highest since December despite surge in price during the week
Gold: Net longs plunged to 175 543 after making a 1-year high in the previous week
Silver: Net long positions retreated as price retreated during the week
Platinum: Net long positions rose surpassed 9000 for the first time since March 09
