Commodities take a pounding: Oil Falls to $90
By Joshuah at 17 September, 2008, 7:00 am
Source: FT.com
Commodities were hammered for the second day running with oil prices falling below $90 a barrel as investors rushed to unwind trading positions in crude amid worries about AIG, the US insurer and the sponsor of a large commodity index.
West Texas Intermediate prices tumbled more than $5 to an intra-day low of $90.51, firming $4.56 lower at $91.15, leading a broad sell-off in base metals and agriculture commodities.
The DJ-AIG commodity index is the second most popular in the asset class, with pension funds and other large investors investing some $30bn in derivatives that track the benchmark. The index fell 2.7 per cent to its lowest level since September 2007.
Bankers said while AIG had not provided all that exposure to the index through derivatives for clients, it was a counterparty for a “significant amount”.
Bankers said investors had moved about $10bn since Monday – more than 5 per cent of the funds tracking commodity indices – because of concerns over counterparty risk from several institutions.
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