Yesterday, US oil prices sank below the $65 a barrel level, heading for their largest monthly drop since crude oil futures started trading in New York in 1983.
Nymex December West Texas Intermediate fell $1.76 to $64.20 a barrel yesterday, flat over the week but on track for a decline of 36.2 per cent in October. ICE December Brent lost $2.11 to $61.60 a barrel, down 0.7 per cent this week.
UBS has chopped its oil price forecasts and expects WTI to average $60 a barrel next year compared with its previous projection of $105, followed by a modest recovery in 2010 with an average of $75, down from $117 previously.
"Oil markets seem to be pricing for a deep and long recession that will derail demand growth [for crude] this year and next," said Jan Stuart, economist at UBS.
October was the worst month for base metal prices for at least 37 years with the Reuters-CRB Industrials index down about 28 per cent.
Mounting evidence that Chinese demand for metals has slowed substantially this year has encouraged hedge funds to bet via "short positions" that prices will weaken. However, producers are cutting output in response to the weaker price environment and this resulted in a violent "short-covering" rebound for base metals in the early part of the week.
Gold traded above the $700 level this week, taking its lead from swings in the dollar and equity markets. It dipped 1.4 per cent to $725 a troy ounce yesterday, down 1.1 per cent on the week.
Author: Jo Amey
