RIYADH, March 29: After all these months, with crude pushing through one barrier after the other, it seems the market is getting back to some senses finally. Some speculators appear opting out of the commodities and if the signals are rightly being interpreted, crude markets could be in for a somewhat bearish reign.

Despite having firmed up again over the last few days, owing to a number of reasons, including the pipeline damage near Basra, after hitting $112, prices at a point plunged, rather abruptly, to even below the $100 mark.

At a point, hardly a couple of weeks ago, oil markets seemed to be continuing to march forward, without any hindrance and interruption. But then almost all of a sudden, to every one’s surprise and indeed comfort, the market seems to have taken a U-turn and an abrupt one. Additional, extra demand-supply forces appear impacting the crude markets in a big, big way.

There are indications now that oil is likely to slide further this spring as lower economic growth seems to be encouraging traders to exit commodity markets, Goldman Sachs Group said in a report on March 20, easing some speculative pressures off the crude market too.

The current global economic woes make an interesting study and are having a major bearing on the crude markets too. Some now equate it to the Japanese economic stagnation of late 1980s and early 1990s while others are comparing it with the US stagflation of the 1970s and 1980s.

And while some watched it closely for parallels with the Great Depression, yet with the integrity of the banking system under increasing question today, some are referring it to the banking panic of 1907. Elements of all these crises are making virtually every economic analyst nervous and edgy. And crude could not remain oblivious to all these.

Last Monday, when the markets resumed after the western weekend, oil prices continued to plunge, before recovering over the last few days. The downward price slide continued, from the earlier week’s record, to 10 per cent amid a recovery in the US dollar and lingering worries over slowing energy demand.

This weakness in oil was tempered by a recovery in US stock markets, after US February existing home sales was reported to have risen by more than expected.

On the other hand, crude markets went soft also on signs that the slowing US economy may cut fuel demand in the world’s biggest energy-consuming country. A US government report on March 19 showed that US fuel demand in the four previous weeks was down 3.2 per cent from a year earlier.

And Saudi Arabia joined in with its bit too. Some say the good, old Cheney may have contributed to this Saudi posture. Yet the fact remains that for too long a bull reign in the crude markets could have put into jeopardy the global crude demand scenario, and everyone here in Dhahran, the virtual global energy capital, realised that too.

Hence immediately after Cheney’s visit, a Saudi Supreme Council for Petroleum & Mineral Affairs meeting, headed by none other than King Abdullah himself, reiterated the Riyadh’s commitment to stabilising the international oil markets “by ensuring adequate supply.” The council “emphasised the Kingdom’s desire for oil market stability and ensuring supplies to different regions at all times to maintain world economic growth.”

The meeting also reviewed progress in development projects being carried out currently to enhance Saudi crude output and spare capacity so very essential for soothing the nerves of the itchy market. Indeed the reiteration of the Saudi stance helped ease the jittery market, one cannot miss out mentioning here.

Saudi Arabia has already announced it was endeavouring to increase its production to 12.5 million bpd from the current 11 million bpd. And some reports do emphasise that there was now a push to get the additional volumes on stream even before the announced schedule.

In the meantime, as the US Fed engineered the bailout of Bear Stearns, easing the fears of international banking meltdown, and the Federal Open Market Committee (FOMC), a component of the US Federal Reserve System, subsequently cut 75 basis point interest rate, the bubble in commodities crude, gold, wheat, zinc, platinum just to name a few, were dealt double blow, contributing to the easing of the crude markets too.

The sheer speed and magnitude of the move in crude, gold and some other commodities suggest that hedge funds have rather de-leveraged, to some extent at least, their bets with borrowed money in the commodity markets. Fund managers seem to have received the cue that Fed cannot risk inflation and hence the rate cut cycle could now well approaching it end.

With at least some speculators leaving commodities, including crude, despite some firming up of the markets over the last few days, some respite in the global crude prices could not be ruled out altogether in the short to medium term.