Investors take sell positions with crude seen declining further

MUMBAI: Even as high volatility in equity markets is making investors more risk-averse, commodity investors have spotted a good opportunity in the falling crude oil price. On MCX, commodity traders are taking sell positions in crude oil as the near to mid-term view is that prices could fall further.

On Wednesday, crude prices for the MCX November contract declined nearly 5% to Rs 3,740 per barrel. The October contract, which expires on Wednesday, closed more than 5% lower at Rs 3,682.

In the international markets, crude oil traded at $76 a barrel levels in early trading sessions in New York, a new low for 2008. ���Indians are momentum players, there seems more downside left for crude, prompting the selling,��� said T Gnanasekhar of Commtrendz Research.

The general economic sentiments in the US and fears about whether the US government���s plan to inject $250 billion into their banking system would prop up the demand caused oil prices to fall further, analysts pointed out.
In the crude oil market, the focus has moved from supply to demand concerns. The global economic slowdown is expected to reduce demand by nearly 15-18%, said Subodh Gupta of Anand Rathi Commodities.

Mr Gupta said even if the OPEC meeting scheduled for November 18 hints at cutting supplies, fundamentals indicate higher supplies.

And to add to the bleak demand forecasts, OPEC has lowered demand growth for 2009 by 100,000 barrels a day, keeping the projected global growth at 800,000 barrels a day in its monthly report on Wednesday.

Some analysts said production cuts by refiners due to falling margins could lead to supply shortage, although the effect of such a move on the prices will be marginal.