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After oil’s rapid surge to an unprecedented high of nearly $148 a barrel, its subsequent retreat at one point to a seven-week low under $123 has provoked speculation about a long-term reaction to significantly lower levels.

More level-headed market sages argue that, just as the surge was faster than the fundamental state of supply and demand warranted and owed something to speculators in the market, so the sharpness of the downturn was probably undue, reflecting the fact that a majority of ‘non-commercial investors’ on America’s Nymex exchange were ‘net short’, betting on lower oil prices, for the first time in 16 months.

Elsewhere, aluminium fell 12.4 per cent from its record $3,375 a tonne to $2,955, despite concern that high energy prices would lift production costs and slow supplies to the market. Nickel has lost some ground as steel producers have held back their purchases and hedge funds have built up short positions.