Crude demand may fall on US recession woes: Normans Martin

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » RELATED NEWS Gold may see USD 865-860/oz levels Crude prices drop more than $2/bbl Geojit Commodities sees gold at $1,000/oz in medium-term Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Speaking exclusively to CNBC-TV18, Ram Pitre , COO, at Normans Martin Advisory Group said, crude could dip to USD 85/bbl level in a day or two. He noted that USD 85.80/bbl-USD 85.20/bbl levels were good levels to buy. He said traders felt that with a slowdown in global economy, the demand for oil will fall.

Commenting on gold , he said it was a definite buy on dips. He added that once it breaks USD 860/oz and USD 863/oz level on the downside, it would become a sell on rallies. He advised investors to remain cautious, as gold had moved higher and crude lower, suggesting irrational buying in gold.

Excerpts from CNBC-TV18's exclusive interview with Ram Pitre:

Q: What do you make of the reduction that you have seen in crude prices at USD 91/bbl or thereabouts? Are you buying into it or are you waiting for more losses?

A: I will be waiting for some more time. According to me, around USD 85.80/bbl-USD 85.20/bbl level is a good level to buy oil because it is likely to fall further. Basically after touching USD 100/bbl because of the recession in US, the traders now feel that with a slowdown in global economy, the demand for oil will fall. Oil fell yesterday after the Saudi Arabian Oil Minister suggested that the OPEC was likely to increase production if needed. Given that President Bush urged an increase in supply.

Q: How quickly do you think USD 85/bbl might happen?

A: Maybe in a day or two. I do not think it is very far away. Technically, resistance lies at USD 92.96/bbl, USD 94.64/bbl and USD 96.92/bbl, which is a trenchant level, and we will see it touch USD 100/bbl again. Supports are at USD 89.98/bbl, USD 88.39/bbl and USD 85.82/bbl, a break of which should bring oil to USD 76.50/bbl.

Q: In a couple of days we might see USD 85/bbl on crude though there has been decoupling between gold and crude, how much of a correction are you expecting in gold prices because we already have seen USD 880/oz in the markets today?

A: Technically the supports at USD 882/oz and USD 870/oz band international market and as long as USD 860/oz and USD 863/oz band is not broken on the downside gold remains a buy on dips. Once broken it would become a sell on rally.

We would remain cautious. Off late, gold has moved higher while oil has moved down, suggesting an irrational buying in gold. One should remember that when the markets get into a buying frenzy the top is not too far away.