Oil price fears allayed by investment bank

13 April 2011

13 April 2011 | Lindsay Clark

Investment bank GoldmanSachs has advised its clients to sell on a group of commodities including oil and copper, having accrued a 25 per cent gain since December.

The move is being interpreted as a signal that rising oil prices may be on the wane. The rising cost of fuel has created a massive increase in input price inflation for many buyers. For example, manufacturers’ input costs for March were 3.7 per cent higher than in February and have leapt by 14.6 per cent when compared to a year earlier, according to the Office for National Statistics.

A report by Goldman Sachs said there were early signs of oil demand easing in the US which, along with record speculative length in the oil market, elections in Nigeria and a potential cease-fire in Libya were “leaving price risk more neutral at current levels”.

Copper prices, which have also seen strong rises, could also ease as a result of lower demand “as high prices and tight credit motivate tight inventory management from China”, the report said.

Since the beginning of the year a range of commodities including coal and oil have seen high prices because of interruptions to production caused by unrest in the Middle East and floods in Australia.

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