This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Oil Prices Tank as Goldman Says 'Sell' Commodities


NEW YORK ( TheStreet) -- The sudden and rapid decline in crude oil prices showed no sign of slowing down on Tuesday, with fears of demand destruction yet again in the headlines, this time courtesy of a new report from the International Energy Agency, and a Goldman Sachs "sell" on commodities issued on Monday continuing to ripple through the markets. Japan's upgrading of its nuclear crisis from a 5 to a 7 (Chernobyl level) was also viewed as contributing to the sudden profit-taking in the markets.

U.S. crude was off by more than 3% for the second straight day and recently trading near the $106 mark. Brent crude was down by close to 2% and recently trading at $120.74.

From a technical trading perspective, the sudden reversal in crude oil trading was not a complete surprise. Crude oil had been on the verge of a key technical level when last week ended, at $110.30, near the $111 mark that crude oil proved unable to hold in September 2008 when the "last gasp" of the bull run was inhaled and right before the collapse of the financial market. Last week's ending price for crude was the latest in a string of highs for crude since September 2008. On Monday, U.S. crude had reached as high as $113, albeit briefly, to end last week, before the selloff began on Monday.

Coming into this week's trading, therefore, technical analysts were wondering whether crude oil would be able to attain and hold the $111 level, signaling that the bull run, at least from a technical perspective, wasn't done yet. The heavy selling over the past two days suggests that, if it's not a last gasp, the bull market is in the least catching its breath.

Another backward-looking trend noted by analysts was that in September 2008, the oil service stocks reversed course a little ahead of the energy sector and oil trade. The OSX index rally ended last week when the group began selling off, even as oil and energy stocks continued to climbed higher.

The Goldman Sachs report released late on Monday announced that it was closing out its commodities basket trade.

"Although we believe that on a 12-month horizon the CCCP basket still has upside potential, in the near term risk-reward no longer favors being long the basket and we are recommending closing the position for a 25% return versus a 28% target," Goldman analysts wrote on Monday.

About oil specifically, Goldman's commodities call states, " Near-term crude oil price risk is becoming more symmetric. Although potential contagion risk in the Middle East and North Africa (MENA) remains elevated and has pushed prices above $125/bbl, at these price levels the risks are becoming more symmetric, which shifts the risk/reward of being long oil. Not only are there now nascent signs of oil demand destruction in the United States...but also record speculative length in the oil market, elections in Nigeria and a potential cease-fire in Libya that has begun to offset some of the upside risk owing to contagion, leaving price risk more neutral at current levels."

Goldman predicts that Brent crude may pull back as far as $105 in the short-term.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs