Crude drops on economic worries, OPEC update

Crude has dropped by almost USD 4 to a barrel, as downward revision has been done from International Energy Agency (IEA), Energy Information Administration (EIA) and and Organization of the Petroleum Exporting Countries (OPEC), which shows that demand is actually on declining side, while the cost of production also seems to be going down.

Here is a verbatim transcript of Manisha Gupta's on CNBC TV18. Also see the accompanying video

Crude has dropped by almost USD 4 to a barrel. USD 78/bbl and USD 75/bbl are the levels that the markets were keeping their eyes on but USD 72/bbl is what they see a support at. If USD 72/bbl also breaches then USD 68/bbl is where you could see crude prices going on to.

The output cost for most of the projects is between USD 75/bbl to USD 85/bbl and we have seen prices breach those levels as well. And the kind of downward revision that has been done from International Energy Agency (IEA), Energy Information Administration (EIA) and and Organization of the Petroleum Exporting Countries (OPEC) shows that demand is actually on declining side, while the cost of production also seems to be going down.

If the global recession, tight credit market, decline in gasoline, heating oil all of that prices, which is putting pressure on the markets; sell on rallies is the kind of strategy you would really have to take in case of commodities as well.

We have seen sharp declines happen in other commodities also. Gold also has not been able to keep on the higher side. Base metals have seen a third week of sharp declines in the markets; nearly 5-8% of declines across the board and most of these base metals and they are trading at 2-3 years lows at this point in time.

Freight rates also have collapsed. We have seen 11% of declines in those as well, nearly trading at 5-years low at this point in time. So it is pretty much the same scenario across the asset markets and the financial markets and sell on rallies stands for all of these.