Hot crude likely to keep commodity prices firm
Amidst the volatility in capital market, commodity market is expected to witness boom in coming days
By Bhargav Trivedi, ET Bureau |
AHMEDABAD: Amidst the volatility in capital market, commodity market is expected to witness boom in coming days. Beginning this week, the global commodity market witnessed minor fluctuations in the crude prices. In Chicago market, prices of soya bean and corn witnessed a fall of around 10%. However, analysts refused to accept this correction on long term. According to them, there is profit booking observed due to correction in crude prices and subsequently the future course of action will be dependent on crude prices.
In the world market the crude prices, from its figure of $145.85 per barrel on July 3 has come down to $ 136 per barrel, which is primarily caused due to decrease in prices of commodities like soya bean and corn that are main ingredients of biofuels. At Chicago Board of Trade, the prices for July delivery futures have come down from $16.63 per bushel to $15.18, an overall decline of 10%. Similarly, prices of corn and wheat have fallen sharply.
However, analysts refused to accept this fluctuation as a trend reversal for commodity market. Religare Commodities head (commodities) Jayant Manglik said: ���With strengthening of dollar, there is slight decline in prices of crude which has resulted in decrease in prices of corn and soya bean. Now, crude has come up to a certain level and it is too premature to say that the slide in prices have begun. Still, we have not observed major upset in prices of crude, and till the time the prices touch $120 per barrel and it stays there for some time, it is not advisable to call it as a long-term correction.���
He further said crude has fundamentals of long-term growth and as of now, taking into consideration the time gap of 30 years, the spare capacity of crude is at its low. There is no supplement of crude available at cheap price. In such a situation, the prices of commodities connected with biofuels will not see a major decline. There is possibility that by Diwali the prices of crude may go up to $175 per barrel.��� In such a situation, the prices of commodities used in biofuels will also increase and will maintain the pace.
However, many analysts believe that despite rise in prices of crude, there is a possibility of observing correction in agricultural commodities like soya bean and corn. ���Currently in the US, the harvesting season for soya bean will start soon which can have some effect on the prices. The climatic conditions seem to be ideal and there are chances of some reduction in prices of soya bean. Moreover, with further correction in crude prices, there is definitive price reduction for soya bean and corn,��� said Karvi Commtrade head Harish Gallipalli.
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