Crude hits all-time high of $142/bbl

The CFTC actually has not reacted till time. CFTC has been hiking margins, they have done it couple of times already in the two months but they really have been milder increases in the markets. People have just knocked off a couple of contracts because of these increase in margins. There has been no major liquidation happening because of what they have done.

One reason why OPEC is not hiking margins very too much is because they would be - it would really lead to liquidation of contracts and there is this fear that all of this business, that Nymex is doing right now would shift to Middle East or Dubai, so they are not taking that step because of that fear because lots of positions would then go to other countries like UK or Dubai that’s one reason there.

Apart from that, since 1973 since CFTC has been into the markets, they have only invoked emergency only four times and that is also because of very major reasons because of price strengths in last few months or last few years, they say is not a very big reason for them to invoke emergency. But the way prices are rising right now, I think it is a major concern, prices have increased by 10% just in this month, up 45% in 2008 and up 98% in past 12 months. So I think that kind of thing should be strong enough to provoke them to take some emergency steps right now.

Will crude see USD150 per barrel now?

USD 140 per barrel never really was a resistance - USD141-143 per barrel has been a congestion area and if crude really takes on that, USD 150-160-170 per barrel are the kind of levels you have been watching in the market - internationally those are the levels we have been getting. Even when you speak to Indian analyst, they have been targeting or they have been seeing on waves anything between USD170 per barrel to USD 185 per barrel on the higher side till the year-end. But then the kind of momentum that we have been seeing in crude prices despite crude being overbought in the markets much more gains is what the people are expecting here. We haven’t really seen demand go on the lower side, demand has gone up in most of the countries. If you just isolate US on the other side, the and demand in US has gone down by 2% but if you look at Japan and if you look at US, India, Asian markets, Middle East and far East everywhere demand has been keeping up despite these higher prices, and with the speculative money into the markets, I think USD150-170 per barrel on the higher side is not going anywhere.

How have Asian markets reacted to the news?

Sajjal Patel, CNBC-TV18

It is a very bleak picture here in Asia as you have so many headwinds. There is the Wall Street tumbling and of course oil prices, which have just hit another record high. That’s really slamming the transport stocks, particularly the airlines and on top of that you have the financials especially after the Goldman Sachs said there would be more write-downs for a number of the banks in the US.

If one takes a look at the damage, Japan for example - Nikkei 225 closing to a two-month low, down 2.01%. One has to remember that these markets posted their seventh straight session of losses there. The boarder topics off by about 1.8% and the exporters severally hit because they are dealing with another problem and that is a surge in the Yen. There is lot of damage in the auto stocks like Toyota, which is off by 2%. Sony, the big lager there, was down 4.3%.

South Korea, the Kospi has similar damage although off the day’s lows, closing down 1.9%. Again we saw a very heavy selling in the export stocks, particularly the techs that get a lot of their earnings from the US. The Hong Kong markets i.e. the Hang Seng index right now down about 2%. H-shares are off by 2.3% and are seeing pretty heavy selling in a lot of the blue chips -- Sinopec comes to mind because it is a refinery, so it is taking a big hit on the back of high oil prices as well as the heavy weight PetroChina and the airlines which are no surprise there, that they are selling off heavily as well.

Shanghai Composite was the big loser today. It was down 5.3% because we are seeing selling there are as well for similar reasons but another concern there is liquidity concerns. We could see some big IPOs coming to that market and of course there is concerns that that market might not be able to absorb new equity issues. So again very weak picture here in Asia.

Experts speak:

Excerpts from CNBC-TV18's exclusive interview with Victor Shum:

A: While in less than 24 hours, oil has crossed the USD 140 per barrel mark twice now, primarily driven by the weak dollar. The US Dollar is not hovering near 3 week lows versus the Euro and there are now renewed credit concerns in the US markets and the weak US economic fundamentals. Goldman Sachs yesterday issued a report which downgrades Citi Bank and also General Motors in the US and that has really caused a rally over the last 24 hours. In the short term, supply side risks and dollar movements will continue to drive up prices. There may be some profit taking to stop pricings from going further. So despite that, the bullish trend remains intact.

A: One can do the status quo co-relation but I tend to focus more on the big macro movements. And ever since the US Fed reserve started to progressively cut interest rates in August last year, we have seen this near doubling of oil pricing. So, certainly there were reduced interest rates in the US and hence the weakening dollar has pushed oil pricing ahead. The key question remains what will the US Fed do with this interest raise with the last indications are that they wont raise interest rates anytime soon, that has caused speculation in amongst currency traders to cause a further weakening of the dollar. And here we are setting new records for oil and so if the European Central Bank raised the interest rates in July, which is actually expected then that will make the Euro strong and hence the Dollar weaker. So in the coming weeks whilst the movements in the Euro versus the dollar, we may see further reasons for oil pricing to go up.

A: If oil convincingly breaks through USD 140 per barrel, then certainly the next level we are looking at is the USD 150 per barrel mark and the momentum is there and the bullish upper trend remains intact.