Oil loses 1%, falls below $90

Oil loses 1%, falls below $90

Nick Trevethan / Reuters

Singapore: Crude oil prices tanked on Wednesday, 31 October, falling 1%, while gold and industrial metals inched up, buoyed by a lifetime-low dollar and expectations of a US interest rate cut.

US oil futures dropped as much as $1.46 or 1.6% to $88.92 a barrel following Tuesday’s 3.4% slide after hitting a record high of $93.80 on Monday.

“Oil has taken a bit of a hit overnight — a combination of profit taking and easing prices in other commodities," National Australia Bank analyst Gerard Burg said.

“There is nothing that really justifies prices in the $90s. Oil deserve more of a retreat but whether it happens is another matter," Burg said, adding that oil, along with other commodity markets would rally if the Fed trimmed interest rates.

Investors are betting the Federal Reserve will lower its 4.75% benchmark funds rate at 1815 GMT to limit the damage from the housing slump and tighter credit conditions.

Eye on oil, gold

On Tuesday, Goldman Sachs recommended closing long positions — bets on rising prices — in oil, agricultural commodities and gold.

“We ... are closing our long WTI and long agriculture and gold positions. We are not trying to call a top here, just take profits from a tactical perspective, as prices could continue to rise in the coming weeks," Goldman said in a research note.

Investors also sold resources stocks.

“We’re seeing people square off the positions in oil, gold and base metals ahead of the US rate decision," said Savanth Sebastian, a market analyst at CommSec.

By 0601 GMT, Woodside Petroleum was down 2.8%, BHP Billiton lost 1.7%, Japanese oil developer INPEX Holdings dropped 3.9% and South Korea’s zinc producer Korea Zinc shed 2.4%.