Singapore: Oil prices held steady Tuesday after sliding more than $4 a barrel in the previous session on concerns about waning crude demand and a general sell-off in commodities.
Speculators have poured money into commodities in recent weeks as a hedge against inflation and a weakening dollar, which neared its all-time low against the euro Monday. But instead of buying on Monday, traders sold off a wide range of commodities, from precious metals and gasoline to pork bellies and soybeans.
“The oil market’s sentiment has turned bearish for the time being,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “The trigger event was the collapse of Bear Stearns.”
Crude futures started plunging in March after the US Federal Reserve-backed sale of Bear Stearns Cos. to JPMorgan Chase & Co. in March created fears of deeper economic problems.
Light, sweet crude for May delivery rose 14 cents to $101.72 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract dropped $4.04 to settle at $101.58 a barrel Monday.
Analysts, though, are split on oil’s direction. Many think prices will rise to new records in coming months as the dollar weakens further. Others say such high prices can’t be sustained.
“All the latest data out of the US shows demand in the first quarter has actually shrunk versus the same period last year,” Shum said. “That’s a very strong sign of how much stress the U.S. economy is going through and how that has impacted demand.”
Barring any new supply disruptions, Shum said he believes prices will move lower.
Crude prices have also been easing on reports of relative calm in Iraq, where two attacks on oil pipelines in Basra last week raised concerns about a plunge in exports. An official with the country’s South Oil Co. said Saturday that operations were back to normal.
Heating oil futures dropped 0.68 cent to $2.8993 a gallon (3.8 liters) while gasoline prices added 0.22 cent to $2.6293 a gallon. Natural gas futures fell 9.1 cents to $10.01 per 1,000 cubic feet.
In London, Brent crude rose 23 cents to $100.53 a barrel on the ICE Futures exchange.