Our market is heading for a nasty 50 point fall at the open Thursday after commodities, led by oil, sold off and markets in Europe and especially the US fell sharply.
Oil futures fell a nasty 4% overnight and gold also dropped, ending its brief rebound of the past three days.
US oil futures actually fell close to $US60 a barrel during trading – breaching that level could see another fall as traders are forced to sell off loss making contracts.
The share price futures trading overnight has our market down 50 points at the opening after the sell off on Wall Street.
That means more downward pressure on the prices of the usual culprits – Santos, Woodside, Oil Search, Beach, AWE, Karoon, Origin and BHP Billiton.
In fact Wall Street saw the Dow lose 1.5%, the S&P 500, 1.6% and the Nasdaq, 1.7% as US oil futures and Brent crude futures in Europe fell to new five year lows.
The culprits this time were surprisingly higher than expected weekly oil reserves data for the US, and another cut by OPEC in its 2015 consumption forecast.
US West Texas type crude fell $US2.62, or around 4%, at $US61.23 a barrel in New York. It was trading around $US61.37 at 8 am Sydney time.
IT actually dipped as low as $US60.43 a barrel and could test the $US60 level during today such is the febrile nature of the market.
In London, January Brent crude futures fell $US2.40, or 3.6%, to $US64.47 a barrel.
Gold fell to $US1,229 an ounce in early Asian trading, down $US3. Comex copper fell 1.1% in New York to $US2.8940 a pound. Other metal prices were down in European and US trading.
The Aussie dollar though rose, trading around 83.20 in early Asian trading and well off the lows of around 82.60 earlier in the session, and closer to 82 cents a day earlier. The US dollar was slightly weaker.
The rising volatility has seen a modest flight to quality for the Aussie, although that could change later today if the November jobs figure show a big rise in unemployment or the unemployment rate. Also watch trading in Chinese markets were a bubble like environment is taking hold – any collapse could be very ugly.
But market sentiment is being driven by oil and the news overnight from the US Energy Information Administration wasn’t good for confidence. It said oil inventories rose by 1.5 million barrels in the week ending last Friday.
Analysts had expected a fall in supplies of around 3 million barrels. It’s an indication that US oil production continues to grow faster than consumption.
Earlier in the night, OPEC said it sees even less demand for its own oil in 2015. After trimming its expected growth in consumption in earlier reports, it now sees a slight fall.
OPEC now predicts that demand for OPEC oil would drop to 28.9 million barrels a day in 2015, compared to 29.4 million barrels a day this year. As well, it said crude production from member countries declined by 390,100 barrels a day to 30.05 million barrels a day in November, compared with October.
