LONDON, Aug 9: World oil prices tumbled this week, in line with almost all commodities, on mounting concern that slower economic growth in the United States will translate into lower global demand for raw materials.
Deteriorating sentiment over the demand outlook (for oil) in the US has taken precedence over concerns over supply risks for now, said Standard Chartered analyst Helen Henton.
OIL: Crude prices also slumped this week owing to a stronger dollar, and easing supply concerns despite an attack on a strategic pipeline bringing crude to the West from Asia.
Oil prices are getting more and more pressure from dollar strength and it doesn’t seem reversible for now, said Serge Laureau, commodities strategist at Saxo Bank in Copenhagen, cited by Dow Jones Newswires.
The dollar struck a five-month high point against the euro on Friday on fading prospects of an interest rate rise by the European Central Bank, dealers said.
A strong dollar makes goods priced in the US unit more expensive for holders of weaker currencies.
Meanwhile, Iraq said on Friday that it was resuming exploration of its immense oil reserves, after a break of nearly 20 years owing to crippling UN sanctions.
Iraq said it wanted to ramp up output by 500,000 barrels per day from the current average production of 2.5 million bpd, about equal to the amount being pumped before the US-led invasion of March 2003.
Exports of 2.11 million bpd currently form the bulk of the war-torn nation’s revenues, and the oil ministry is keen to raise capacity over the next five years to 4.5 million bpd.
World oil prices had on Thursday risen towards $120 a barrel on news that a pipeline carrying crude from Central Asia to the West would remain shut for about 15 days after a recent explosion.
On Friday, separatist Kurdish rebels claimed responsibility for Tuesday’s blast on the Baku-Tbilisi-Ceyhan pipeline in eastern Turkey which is expected to leave the pipeline shut for two more weeks.
Despite modest price gains on Thursday, the oil market has dived lower this week on mounting concern that slower economic growth in the United States would translate into lower global energy demand.
On Monday, prices slumped under $120 a barrel in New York and London for the first time in three months, as a tropical storm looked set to miss energy installations in the Gulf of Mexico.
The US government meanwhile reported US consumer spending, which fuels two-thirds of output, had cooled in June and inflationary pressures accelerated.
Prices extended their slide on Tuesday as signs of a slowing global economy raised further doubts about demand.
Oil futures have shed about 20 per cent in value since hitting record highs above $147 per barrel on July 11.
By Friday, Brent North Sea crude for September delivery dived to $114.06 from $125.02.
New York’s main oil futures contract, light sweet crude for September slumped to $116.28 a barrel, from $126.76 a week earlier.
PRECIOUS METALS: Gold, silver and platinum prices increased recent losses as the dollar rallied.
A stronger dollar is contributing to pressure on commodities, although we would argue that a lot of the reason for the strengthening of the dollar is the recent correction in the oil price, said UBS analyst John Reade.
The dollar-denominated gold price is particularly affected by US dollar strength, he added.
On the London Bullion Market, gold dropped to $852.50 per ounce at Friday’s late fixing from $912.50 a week earlier.
Silver fell to $15.76 per ounce from $17.59.
On the London Platinum and Palladium Market, platinum decreased to $1,552 per ounce at the late fixing on Friday from $1,675.
Palladium stood at $345 per ounce from $367.
BASE METALS: Base metals prices dropped across the board, with slowing economic growth around the world dampening demand.
Generally there is little fresh news to drive the markets so they are being jostled by outside factors, mainly the dollar and oil, said William Adams of Basemetals.com.
It does look more and more likely that the US is heading for recession and Europe and Japan are likely to suffer too, which in turn is likely to cause a bigger slowdown in Asia. All of which is not going to be bullish for metal demand.
Indeed there is a distinct possibility that concerns over slower demand overtake concerns over supply shortages, added Adams.
By Friday, copper for delivery in three months dropped to $7,430 per ton on the London Metal Exchange from $7,924 a week earlier.
Three-month aluminium fell to $2,867 per ton from $2,929.
Three-month lead slid to $1,994 per ton from $2,150.
Three-month zinc slipped to $1,709 per ton from $1,850.
Three-month tin decreased to $19,900 per ton from $21,525.
Three-month nickel recoiled to $17,850 per ton from $18,750.
GRAINS AND SOYA: Maize and soyabean meal prices dropped, while wheat futures rose thanks to strong export sales.
We’ve been down sharply on the corn and the soybeans, said Bill Nelson of Wachovia Securities. Prices fell in part owing to a drop in crude oil futures.
Maize and soya are used to produce ethanol, a cheaper alternative to motor fuel.
By Friday on the Chicago Board of Trade, maize for September delivery tumbled to $5.05 per bushel from $5.65 the previous week.
November-dated soyabean meal -- used in animal feed -- retreated to $12.02 from $13.65.
Wheat for August delivery rose to $8.03 per bushel from $7.94.
COFFEE: Coffee prices dropped.
The London market resumed its seasonal lull, said Sucden analyst Ralph Hawes.
By Friday on LIFFE, Robusta for September delivery slipped to $2,346 per ton from $2,417 a week earlier.
On the NYBOT, Arabica for September delivery decreased to 137.60 US cents per pound from 138.85 cents.
COCOA: Cocoa prices ended lower after a volatile week.
It has been a week of crazy price movements, said Sucden analyst Stephanie Garner.
By Friday on LIFFE, London’s futures exchange, the price of cocoa for September fell to 1,473 pounds per ton from 1,592 pounds a week earlier.
On the New York Board of Trade (NYBOT), the September cocoa contract stood at $2,743 per ton from $2,965.
SUGAR: Sugar prices declined.
By Friday on LIFFE, the price per ton of white sugar for October delivery slipped to 393.20 pounds from 398 pounds the previous week.
On NYBOT, the price of unrefined sugar for October delivery retreated to 13.89 US cents per pound from 14.11 cents.
RUBBER: Malaysian rubber prices extended losses on lower demand after China-based companies cut production ahead of the Olympics, dealers said.
The current price has been dropping for a month. It has not scratched the bottom yet, a dealer with an international commodities firm said.
The low demand in raw materials is due to the summer (holiday) season in Europe and in the US. Factories in China have also reduced the use of the commodity as they slow down their production, he said.
On Friday, the Malaysian Rubber Board’s benchmark SMR20 fell to 299.30 US cents per kilogramme (2.2 pounds) from 309.60 US cents a week ago.—AFP
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