Oil
The crude oil prices decreased on Tuesday under pressure of new fears regarding the debt situation in Europe and stock indexes falling.
By the end the New York Mercantile Exchange July futures for sweet crude oil ticked down by 1,46 dollars to 68,75 dollars per barrel. Oil futures of Brent mark decreased by 1,62 dollars or by 2,3% to 69,55 dollars per barrel reaching the lowest level from October 7,2009. The oil prices of Brent mark has fallen the ninth straight month. This is the longest series of drops from the middle of September, 2008 when price downtrend was continuing 14 days.
Oil futures on the New York Mercantile Exchange did not manage to fix at a slight 2-day recovery within which they exceeded the level of 70 dollars per barrel. This recovery came after that on Thursday the oil prices lowered to 10-month minimum at 64,24 dollars when June contracts elapsed. Traders think that there is no any strong incentive which could allow the prices avoid another testing of this minimum.
The traders are worried that backwash of the sovereign debt problems are now take place in Spain. These problems led to the rescue measures package for Greece in the amount of almost 1 trillion dollars and contributed to a sharp dollar growth against the Euro. A strong dollar made some potential oil buyers stay in a holding pattern, as the American currency uprise raises the oil cost in other currencies.
Although, the fundamental factors of supply and demand were put aside because of other markets difficulties, concerns regarding huge excessive reserves of oil and oil products in the USA still remain.
Bank of America Merrill Lynch cut its forecast unexpectedly for oil prices for the second part of 2010 to 78 dollars per barrel versus 92 dollars per barrel. The bank they cited on the confidence crisis in the European sovereign debts much lower Euro rate against the dollar and higher than expected delivery volumes from the countries not included in OPEC. The bank also reduced its global demand forecast on oil this year by 500 000 barrels per day to 1,5 mln. barrels per day due to expected economic growth slow down.
The oil Minister of Kuwait announced that OPEC is worried by the oil price fall below the comfort zone of 70-80 dollars per barrel and called for more careful observation of existing oil extraction constraint.
By the way, the traders noticed that the pressure on the cartel will increase if the prices decline below 60 dollars per barrel.
Gold
The Gold futures rose slightly on Tuesday while the prices for the most other commodities went down. The Gold continued gaining due its role of a sanctuary currency because of debt problems in the Eurozone and some tension on the Korean Peninsula.
In the meantime, the prices on other precious metals lowered as a weak dynamics of stock markets brought the fears regarding the global economy and regarding the production demand. The June futures on Gold ticked up by 4 dollars or by 0,3% to 1198 dollars per ounce. Futures exceeded the level of 1200 dollars for a while that has happened for the first time since last Wednesday and touched the maximum at 1200,40 dollars.
Euro began lowering again that was reflected in maintaining fears concerning the European sovereign debts and the banking system stability in the region.
Gold is considered as a sanctuary asset not only in the periods of economic uncertainty, but also in the periods of geopolitical stress. Due to this Gold also won from a tension between the North and South Korea. The USA and South Korea announced about holding joint martial exercises after that Seoul blamed the North Korea for patrol ship wreckage drowned at the end of March, and the North Korea has probably generated its forces to higher alert status.
Gold purchases as a sanctuary asset became the main factor of supporting the metal. Gold prices gained further support from the activity related to the options.
Nevertheless, the Gold price upturn turned out to be the most moderate on Tuesday that was possible caused by the expectations that the investors will have to close their Gold positions with the purpose of getting cash necessary for covering the losses and satisfaction of margin requirements on other markets especially in case of general collapse on the markets.