Singapore: Crude oil prices retreated from a 32-month high on Tuesday and probably would extend declines through the day, with investors taking profits as equity markets fell and the US dollar rebounded.
The global rout in commodity prices also hurt demand for currencies such as the Australian dollar, which tumbled 2% against the yen, while the euro shed 1% versus the yen and weakened against the dollar after its recent rally.
The drop in crude was triggered, in part by a Goldman Sachs report, which advised investors to lock-in trading profits before oil and other commodity markets reverse. Developments in Libya, where a peace bid collapsed on Monday, may also provide cues.
“I am absolutely on the side where I expect oil to come down,” said Brynjar Bustnes, head of regional oil and gas for Asia-Pacific at J.P. Morgan in Hong Kong.
“Whatever happens in Libya will be negative for oil prices because the worst case is really priced in,” he said, cautioning that sudden spikes may still occur with the sell-off likely to be short-term profit-taking.
Brent crude for May fell to a low of $121.97 a barrel, easing from Monday’s 32-month peak of $127.02. US crude fell to as low as $108.15, after reaching an early $113.46 peak, the highest traded price since September 2008.
Brent may fall to as low as $118.67, while US crude may find support at $106.81, charts indicate.
Commodity shares from Australia to Japan led a broad decline in Asian equities, after energy and metals prices slid overnight, while gold and silver, traditionally safe-haven investments, also gave up gains.
Tokyo’s Nikkei share average fell 1.6% to 9,763.93, as blue-chip stocks fell on increasing uncertainties about the earnings outlook after the March 11 earthquake.
“Many people worry that more and more large-cap companies including big automakers may cut their earnings estimates for the business year,” said Hideo Arimura, senior fund manager at Mizuho Asset Management.
The MSCI index of Asia Pacific shares outside Japan was down 1.9% and on course for the biggest daily decline since the quake in Japan triggered panic selling in the region on March 15.
Foreign investors had been key buyers of shares in the region, pushing the benchmark indexes of major markets up between 7% and 13% over the past three weeks.
In the currency markets, the euro fell as low as 120.22 yen , after rising more than 11% since January. It also fell below $1.44 , down 0.3% on the day and heading toward support at the April 6 high of $1.4350.
Spot gold fell $9.94 an ounce to $1,456.81 an ounce, having hit a record around $1,476 an ounce on Monday while spot silver slipped 19 cents to $39.98 an ounce, below a 31-year high at $41.93 struck on Monday.
The Reuters-Jefferies CRB index fell for the first time in eight days on Monday, down 0.7%.