Singapore: Crude oil prices may have found a temporary base after the Organisation of Petroleum Exporting Countries production cuts, said Mike Coleman, managing director of Aisling Analytics Pte, which manages $1.3 billion (Dh4.7 billion) of funds.
"Opec may have done enough for now," Coleman said at a rubber industry conference in Singapore yesterday. "As last week has demonstrated, you can get very sharp bear market rallies. Prices could fall back again until you chew through excess inventories."
Crude oil in New York rose to the highest in four months yesterday as the dollar extended its losses against the euro, increasing the investment appeal of commodities. Oil has rallied 18 per cent this year although it is still 64 per cent below the record $147.27 a barrel in July.
It's unclear if oil can find a stable level unless inventories wind down and prices reflect a long-term mean, which "may be in 2010, 2011," Coleman said.
"Until then, it's very difficult to be very bullish the spot price of oil and other commodities including rubber," Coleman said.
"This is worse than the Asian economic crisis of 1997 to 1998 and worse than the recession of 1980 to 81," Coleman said.
"Demand destruction is considerable. The world is 40 per cent poorer than it thought it was."
A lot depended on whether the bailouts and rescue programmes restore confidence, Coleman added.
The US Treasury was due to unveil details later on how it plans to help banks reduce the toxic assets on their books to revive credit markets.
Rubber prices may be supported by a recovery in crude oil prices, which may end the year at $65 a barrel, said Nancy Seah, an executive director at Goldman Sachs, at the same conference.
Jeffrey Currie, Goldman's head of commodities research, last month called a bottom for crude oil when it traded below $38.
Rubber is mostly used in the automobile industry, where more than half of the commodity is synthetic rubber derived from petrochemicals, according to the International Rubber Study Group. Synthetic rubber prices fluctuate with crude oil prices.
Half of butadiene, a petrochemical product, is used in rubber products, Samuel Liew, an associate consultant of Asia Olefins & Elastomers, CMAI (Singapore), said at the conference.
Currie and other Goldman analysts including Giovanni Serio called a near-bottom for crude oil on February 16, citing production cuts by Opec, supplier of more than 40 perent of the world's oil.
Crude oil in New York was trading above $50 a barrel for a third day, helped by a weaker dollar as investors sought hard assets as a haven against inflation. It has gained 9.3 per cent in the past three days and 39 per cent since Goldman made its call.
