Brent crude fell below $100 a barrel yesterday for the first time in nine months as continued concerns about the global economy weighed on the outlook for demand, while gold and US stocks rebounded after the recent sell-off lured buyers into the market.
The broad rout in commodities and stocks seen in recent sessions was triggered by data from China and the United States that raised worries about the strength of the global economy’s recovery.
Those fears continued to weigh on oil yesterday, with Brent crude down $1.15 at $99.48 a barrel. US crude lost 36 cents to $88.35.
“We are still seeing some weakness in price, in contrast to a number of markets that are snapping back to the upside with more vigour. That’s because we still have a lot of oil,” said Tim Evans, an Energy Futures Specialist at Citi Futures Perspectives in New York.
“I think what we’re seeing is a shift in the oil markets’ focus to its own fundamentals, rather than trying to pretend that the oil market is the equity market, or a currency market.”
US stocks gained yesterday, supported by strong earnings results from some of America’s biggest companies and on expectations that the Federal Reserve will continue to provide stimulus.
Gold bounced after plunging more than eight per cent on Monday. Spot gold initially dropped further, to $1,321.35, before reversing direction to be up nearly two per cent at $1,377.61 yesterday afternoon.
Gold has fallen about 20 per cent so far this year after an unbroken 12 years of gains and is down some 28 per cent from the record high hit in September 2011 of $1,920.30 an ounce.
“I think everyone has to take a breath now, but there are people who still want to sell and they haven’t done so yet,” said David Govett, head of precious metals at Marex Spectron.
Analysts have cited various reasons for gold’s latest slump, including funds switching out of bullion and the possibility that other central banks in Europe could use Cyprus’s bailout plans to sell excess gold reserves as a reason to sell some of their own holdings.
MSCI’s global share index, which tracks around 9,000 stocks in 45 countries, was up 0.6 per cent, having been almost 0.5 per cent lower earlier in the day.
The FTSEurofirst 300 closed 0.7 per cent lower.