Oil prices are suffering another sharp pullback on worries the high price of crude is already cutting into demand.
Sources say Saudi Arabia, the world’s top oil exporter, has cut production by about 500,000 barrels a day to compensate for the drop in energy use.
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And that production cut comes as the International Energy Agency warns surging energy prices will hurt the global economic recovery, which will lead to lower energy consumption.
Goldman Sachs, a long time commodities bull, told clients for a second day that now is the time to pocket gains made in the sector.
Some analysts agree. They say oil prices have rallied too far in the short-term. But in the long-term oil and other commodities are still a buy.
Michael Hewson, market analyst at CMC Markets says, “There are so many different factors driving commodity prices higher. There’s uncertainty about the U.S. fiscal policy going forward, you have rising inflation, you’ve also obviously got supply concerns in respect to agricultural commodities and soft commodities. And you’ve also got unrest in the Middle East, which I don’t think is going to go away anytime soon.”
That’s why, even after a two-day slump, few analysts expect oil to go back below $100 a barrel.
Bottom line: Global oil prices are down sharply for a second day amid warnings demand is already slipping due to high prices. A cut in Saudi oil production and a second call from Goldman Sachs for investors to book profits added to the bearish move.