Oil, gold, silver and copper bounced overnight, ending the great post OPEC decision commodity sell off, a recovery which will help our market steady today after two days of huge losses.
The rebound will stop the selling wave on local markets – for how long remains to be seen and what happens to prices from now on.
Selling on Friday and yesterday wiped $53 billion from market values as the market well 3.7% or more than 193 points for the ASX 200, pushing the market deeper into the red for the year so far.
Oil jumped in offshore trading and US prices have continued rising this morning – it was back above $US69 a barrel, while Brent crude recovered and zoomed past the $US72 level – both types of crude had traded down to new lows earlier in the night.
Brent crude initially sank to $US67.53 a barrel, its lowest in five years, as the fallout from Opec’s failure to cut production levels last week continued to rattle sentiment.
But the global benchmark crude jumped back to $US72.67, up more than $US2.40 from, or more than 3.8% from Friday’s settlement.
But suddenly the market turned and both jumped sharply.
WTI crude in New York fell to a low of $US63.72, but rebounded to trade around $US69.37 in early Asian trading this morning, a gain of 4.8%.
Gold, silver and copper also rebounded.
Moody’s downgrading of Japan’s credit rating played a part in the change of sentiment, as did a flal in the value of the greenback (See the story on Asian economic updates), while profit taking and purchases by some regular traders bargain hunting, also helped prices recover.
Major stockmarkets were left behind – Most Asian markets, with the exception of Tokyo fell yesterday, European markets were in the red and Wall Street fell, steadied, and then traded with small losses all session.
Our market will start the day up a few points according to the overnight futures trading.
Gold futures reclaimed the $US,200 level for the first time since late October.
Comex gold for February delivery jumped $US42.60, or 3.6%, to settle at $US1,218.10 an ounce in New York.
Marketwatch said the last time the precious metal closed above $US1,200 was on October 29.
Comex March silver futures jumped $US1.14, or 7.3%, to $US16.69 an ounce and Comex copper stopped falling and recovered 1.8% to close at $US2.89 a pound.
Locally, watch energy shares for evidence of confidence returning. The local sector lost 6.4% yesterday.
Woodside shares lost 4.3% yesterday, to $42.20, on top of big losses last week; LNG saw its shares shredded – down 22.5%; BHP Billiton shares fell 5.3% and under $30 to end on $29.27 as it was assailed on both the iron ore and oil front (as we pointed out on Friday afternoon).
Rio Tinto shares fell 4.1%, despite a small rise in iron ore prices over the weekend.
But they fell 0.3% overnight Monday to $%US71.11, a small fall which will weigh on the sector today, especially after the weak Chinese manufacturing data yesterday.
Oil Search shares lost 8.5%, Origin Energy shares fell 4.5% and Santos shares dropped 9.8%, to be down 20% since the start of last week at $9.11.
Qantas shares rose more than 4%, on top of last week’s 8.5% rise. It ended at $2.01. Will it remain above the $2 level today – the first time it has been there for more than three years – or will it fall on the rebound of oil prices?
So has anything changed overnight for oil to sustain the rise?
According to analysts from Commerzbank, the answer is ‘no’
“Nonetheless, there is no end in sight to the price slump, the prospect of a massive oversupply in the first half of 2015 – to the tune of roughly 1.5 million barrels per day – weighing heavily on prices. Now that OPEC has refused to take any steps itself to reduce this oversupply, non-OPEC producers will have to do their bit,” the analysts wrote in a report overnight.
