LONDON: Oil held above $81 a barrel yesterday after governments around the world acted to shore up confidence in the global banking system, spurring a rally across commodities markets.
But investment bank Goldman Sachs said the financial crisis had already done more damage than it expected to commodity demand and warned that a slide to $50 a barrel for oil could be possible.
US crude for November delivery was up $3.42 at $81.12 a barrel by 1502 GMT, below a session high of $82.52. Prices had plunged on Friday to their lowest since Sept. 10, 2007. London Brent crude was up $2.87 at $76.96 a barrel. “The announcements from over the weekend would have some positive effects on the markets, even though it’s still early days (and it is difficult) at this stage to say if they would put an end to the financial crisis,” said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
Goldman Sachs, a longstanding commodity bull, turned a near-term bear yesterday after conceding that the global financial turmoil would take a far bigger toll on demand.
“We have underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand,” its commodity markets research team said.
The bank cut its year-end US crude oil target to $70 a barrel, down from a previous forecast of $115 a barrel, and slashed its average 2009 forecast by a third to $86 a barrel.
A fall in demand in the US and other developed economies has helped drive oil down nearly 50 percent from its July peak above $147 a barrel.
Oil’s fall has caused some members of the Organization of the Petroleum Exporting Countries (OPEC) to call for a cut in production levels. “We expect the organization to be more vigilant in keeping to quotas now that prices have slipped below $90 a barrel and to vigorously defend $80,” Standard Chartered Bank said in a research note.
