Commodity prices remain volatile after sharp fall

Watch: Harold Wheeldon says "oil reflects slight easing of tension in Middle East"

Commodity prices have seen large swings, falling sharply at first before fully recovering.

Brent crude oil initially fell 5.8% to $105.15 a barrel, adding to an 8.6% drop on Thursday, before recovering to above $110 by mid-afternoon.

The rebound in the price of major raw materials was given a boost by strong US jobs data, which also pushed European stock markets up by nearly 1%.

The volatility comes a day after one of the biggest market sell-offs in years.

The sell-off affected most types of commodity.

Industrial metals saw further sharp swings on Friday. Copper futures fell a further 1.75%, following a 6% slide a day earlier, before recovering.

Meanwhile, the price of US sweet, light crude oil fell a further 5.5% on Friday morning to $94.63 a barrel, but then recovered to around $98, where it remained steady until late into the evening.

Shares resilient

Prices of precious metals - such as gold and silver - held steady during the morning, despite having previously followed other commodities sharply lower during Thursday's market rout.

Brent Crude Oil Futures $/barrel

Last Updated at 31 Oct 2014, 12:15 ET *Chart shows local time Brent Crude Oil Future intraday chart
price change %
85.38 -
-0.86
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-1.00

However, silver prices suffered another wobble, briefly down 5%. The price of silver has fallen more than 30% since it hit an all-time high last week.

Stock markets also proved resilient. After falling slightly at the start of trade, European stock markets recovered and pushed higher, rising further when figures showed that more jobs than expected had been created in the US in April.

Thursday's commodity price rout was prompted by disappointing data on US benefit claims and German industrial orders.

The dollar also remained stable against other currencies on Friday, in contrast with Thursday, when a sharp rise in the greenback contributed towards the fall in commodity prices, which are measured in dollars.

'Scary' correction

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The hope is that the past few days show the global economy moving further away from crisis and the emergency policies that it produced”

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Analysts warn the volatility in the markets could remain.

"When you have this kind of damage, it will take several weeks, or maybe several months... for confidence to be rebuilt," said Dennis Gartman, author of a markets guide.

"It's not the end of the commodities cycle, not even close. You still have to call this a correction. It's a sizable one and scared the heck out of everybody."

However, other analysts suggest that it could mark the beginning of a more sustained fall.

Emma Pinnock, energy analyst at Inenco, sees the oil price dropping back below $100 a barrel within days if not sooner, as markets realign supply and demand.

"Ultimately the price increases that we saw of almost 12% since the beginning of 2011, due to instability in the Middle East, the Japanese earthquake and the nuclear crisis, were not sustainable," she said.

"The poor economic data released from the US and Europe has confirmed fears that the recent high commodity prices could affect global demand."

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