Benchmark oil prices are set to decline further this week after the U.S. Federal Reserve Chairman Ben Bernanke put markets on notice last Thursday that they will be weaned off the "easy-money" policies that have been so central to supporting risk assets such as commodities.
Dubbed "Black Thursday" by Commerzbank analysts, commodity markets suffered their biggest drop in a year and half, hit by bleak Chinese data and the Fed's plan to slow its bond-purchase program by the end of the year.
The 19-commodity Thomson Reuters-Jefferies CRB index sunk 2.5 percent on Thursday, its sharpest decline since December 2011. Gold bore the brunt of the Fed-induced sell-off with bullion hitting a two-and-a-half year low. U.S. crude oil sank 3 percent. That helped ease the threat of triple-digits, offering a degree of relief for consumers.
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Last week's survey highlighted the risk of $100 U.S. crude, but noted oil bulls needed a dovish Fed to take prices over the century mark. Furthermore, the critical level has proven a tough barrier to break and attempts to challenge the century mark had failed five times this year.
Despite fears of a liquidity crunch in China, the world's second-largest economy, U.S. crude rebounded on Monday by $1.49 after a three-day slide while Brent crude eased 25 cents to $100.91 a barrel. Lingering fears of supply disruptions driven by political tensions and conflict in the Middle East were limiting pronounced market weakness, according to some strategists.
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"The fundamentals certainly do argue for slightly lower prices, though not significantly lower prices," David McAlvany, CEO of McAlvany Financial Group told CNBC Asia's "Squawk Box" on Tuesday. Oil markets have been "relatively strong even with the OPEC continuation of ample supplies, so I would have to say it's got to be the fear premium" supporting prices."