Oil prices plunged on Friday after the U.S. Securities and Exchange Commission charged Goldman Sachs with fraud in its marketing of certain subprime mortgage securities, amid a general sell-off in financial and commodity markets.<\/p>\n
The allegations against one of the biggest market makers in virtually every markets dampened speculation heading into the weekend. Much like the volcanic eruption in Iceland spewed a cloud of dust over northern Europe that grounded all air travel, the SEC charge cast a pall over financial markets.<\/p>\n
The May contract for West Texas Intermediate, which expires next week, settled down $2.27 or 2.7% at $83.24 after briefly dipping below $83 in the wake of the SEC announcement. The benchmark contract settled at $84.92 a week earlier.<\/p>\n
Goldman Sachs had no immediate comment. Prices had been drifting lower in equities and other markets prior to the announcement, but fell sharply afterwards, led by a plunge of more than 10% in Goldman shares.<\/p>\n
Some analysts speculated that prices could rebound on Monday once the dust has settled, but market participants remained uncertain about the long-term impact of the SEC charge on Goldman’s business and on that of other major banks.<\/p>\n
In the past, Goldman has rejected charges of misleading investors when it sold securities that it subsequently shorted in its own trading, asserting that that is the role of a market maker. Goldman is one of the biggest participants in the energy futures markets.<\/p>\n
Oil prices started the week soft, but firmed up after Wednesday’s inventory report from the U.S. Energy Information Administration, which showed a small decline in crude inventories after 10 successive weeks of increases.<\/p>\n
An unexpected decline in April consumer sentiment reported on Friday, however, led to new doubts about the strength of the economic recovery and depressed prices. The market had been expecting a reading of 75 after 73.6 in the previous month, but instead the index came in at 69.5.<\/p>\n
The inventory report on Wednesday pushed oil prices up 2.1%, to $85.84. But the monthly outlook from OPEC released the same day actually revised its forecast for 2010 demand for OPEC oil downward by 135,000 barrels a day from the previous month, to 28.8 million barrels a day. The group’s expectation for the overall growth in oil consumption also trails that of other analysts.<\/p>\n
By. Darrell Delamaide for Oilprice.com who offer detailed analysis on Crude oil, Geopolitics, Gold and most other Commodities<\/a>. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http:\/\/www.oilprice.com<\/em><\/p>\n