Global commodity markets remain range bound

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Tanushree Mazumdar: May 30 2011, 20:42 IST

The power or (the lack of it) of ‘sell-side research’ (undertaken typically by brokerage houses, investment banks and others who give ‘buy’, ‘sell’ or ‘hold’ calls) was briefly demonstrated in global commodity markets last week. Early in the week Goldman Sachs and Morgan Stanley raised their forecast of Brent crude prices by the end of the year to $115 per barrel for a 3-month horizon, $120 per barrel for a 6-month horizon and $ 130per barrel for a one year horizon thereby sending a ‘buy’ signal to the market.

Though the crude oil futures prices did rally by 2% in reaction to the report it did so briefly and then dropped by around 1% the following day, indicating that the market did not completely accept the new forecast. It might be recalled that in April Goldman Sachs had sounded bearish on commodities and had given a ‘sell’ call. The rout in commodities in early May to an extent was attributed to this bearish call. But this time round the markets seemed to have kept their own counsel, while at the same time noting the forecast by the two investment banks.

The other important news with respect to crude oil was the crackdown on physical market manipulators by the US commodity regulator Commodity Futures Trading Commission in the form of a suit that was filed last week against traders in Australia, US and other some other international firms for trying to manipulate the crude oil futures market back in 2008 by hoarding physical

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