Oil

ON September 21, oil fell to the lowest in more than two weeks in New York as investors speculated that fuel demand will falter after the US Federal Reserve said there are significant downside risks to the economic outlook of the world biggest crude-consuming nation. Futures slipped as much as 2.2 after dropping 1.2 per cent on September 21. The Fed said it will buy $400 billion of long term debt in an attempt to keep the economy from relapsing into a recession. US gasoline stockpiles climbed more than forecast earlier and the nation’s production rose to the highest in eight years. Energy Department reports showed.

Crude for November delivery dropped as much as $1.87 to $84.05 a barrel, the lowest since September .6, in electronic trading on the New York Mercantile Exchange on September 21 and was at $84.44 at 2.55 per month. Sydney time. The contract on Sept.21 fell $1 to settle at $85.92. Prices are 13 per cent higher the past year. Brent oil for November settlement fell $1.67,or 1.5 per cent, to $108.69 a barrel on the London based ICE Futures Europe Exchange. The European benchmark contract was at a premium of $24.25 to US futures, compared with a record $26.87 on September .6, based on November settlement prices.

US gasoline inventories surged 3.3 million barrels to 214.1 million barrels, the biggest one week gain since May and the highest level since July, a report from the Energy Department shows. They were forecast to increase 1.35 million barrels, according to Bloomberg News Survey of analysts. Crude oil stockpiles decreased 7.34 million barrels to 339 million in the week ended Sept.16, the lowest level since January , the report showed. They were forecast to decline 1.3 million barrels, according to the Bloomberg News Survey. Supplies are 3.4 per cent higher than the five year average. Inventories of distillate fuel, a category that includes heating oil and diesel declined 874,000 barrels to 157.6 million. They were forecast to increase 1 million barrels.According to the US Energy Department, Opec members are poised to earn an unprecedented $ 1 trillion this year, as the group’s benchmark oil measure exceeded $ 100 a barrel for the longest period ever. They are promising to plow record amounts into public and social programmes. Gulf nations have pledged $150 billion in additional spending this year on their citizens.

Opec’s basket of crudes, a weighted average of the group’s main export grades, has been trading at above $100 since Feb 21.

The basket price was $108.68 a barrel on September 19, while WTI on the New York Mercantile Exchange closed at $85.70.

Opec will need WTI at above $80 a barrel to maintain the increased social spending because the costs of the Persian Gulf budget obligations have more than doubled since 2006 to $77, with Saudi Arabia needing an average $ 82, according to Deutsche Bank AG. Opec’s basket price at more than $100 puts it on course to earn $ 1.01 trillion this year.

Gold

IN the New York market, gold fell about 1 percent on Sept 21 after the Federal Reserve indicated it was rebalancing its bonds portfolio in favour of longer dated bebt, as widely expected by the market. It had fallen to $1784.94 an ounce. US gold futures benchmark December contract dipped below $1785 an ounce after Sept 20 settlement of $1809.10. After surging to a record high above $1900 an ounce this month, gold has shed about eight per cent over the past two weeks, with about a quarter of that decline coming on September 19. Instead investors snapped up long dated Treasuries, and poured into the dollar even though the Federal Reserve has all put promised to keep short term interest rates near zero until at least mid 2013.

Over the last few months, gold had been viewed as one of the most solid of safe havens, particularly at a time when developed countries saddled with slow growth and high debt have been trying to inject life into their economics and export sectors with weaker currencies. For some worries that massive monetary and fiscal stimulus would eventually stoke inflation also pushed gold higher. But fear that a Greek default would push other indebted euro zone countries further into distress and spark losses across the European banking system has investors falling back on the depth and safety of the dollar. Some said gold’s decline may be a sign that investors who jumped on the bandwagon early enough are booking some profits. Gold entered the year trading around $1400 an ounce and has risen steadily since. Its gains picked up speed over the summer, hitting a record above $1920 this month.Gold has climbed 27 per cent this year as turbulence in equities and currencies, money printing by central banks, and a decade long bull market in the metal lure investors to an alternative store of value. Gold for immediate delivery was at $1774.70 an ounce at 11: 25 a.m. in Shanghai on Sept 22 after reaching a record $1921.15 on September .6.On September 22 in the Singapore market, spot gold slipped under the weight of a rallying dollar. The US Federal Reserve has warned of significant downside economic risks and said it would launch a $400 billion programme to shift its $2.85 trillion balance sheet more heavily towards longer term debt. The worries about the euro zone’s debt crisis continue to support the safe haven appeal of gold, but momentum is lacking for bullion to march towards its record high above $1900.

Gold’s rally is expected to extend beyond $ 2000 an ounce in the next year, but won’t match the record breaking 50 percent surge of the last 12 months, according to an annual survey of gold investors and analysts at the world’s biggest bullion traders event in Montreal recently. Prices had lit a record $1920.30 an ounce on Sept 6. They have since retreated however, and are down 2.5 percent so far this month after a period of intense volatility

Copper

IN the Singapore market, commodities tumbled on September .22, led by copper, after the US Federal Reserve’s warning of a grim economic outlook and a contraction in Chinese factory output added to concerns about slowing demand for fuels and metals.

China factory sector shrunk for a third consecutive month in September as flagging overseas demand put the brakes on new orders. The continued deceleration in the manufacturing sector of the world’s second largest economy came after the Fed warned about a slowdown for the US economy, the world’s largest.

Three month copper on the London Metal Exchange dropped as much as 3.1 percent to a 10 month low of $8039.75 a tonne, spot gold fell almost two per cent and crude tumbled more than $1 a barrel. The Fed’s announcement of a $400 billion long-term debt purchase plan failed to alleviate concern that it needs to do more to support economic expansion.

The last Fed quantitative easing policy, ended on June 30, flooded the market with cheap money and boosted commodity prices. Weak growth in the developed world has hampered demand for commodities there, but this has been more than offset by booming demand in the developing world, especially from China’s now slowing manufacturing sector. LME copper has fallen 16 per cent so far this year after surging 30 per cent in 2010. The most active December copper contract on the Shanghai Futures Exchange SCFc3 lost four per cent to 60450 yuan a tonne, the biggest one day decline in almost seven weeks.

Other base metals tracked falls in copper, with benchmark tin slipping to its lowest level in a year at $21516 a tonne. It later ended at $2150 a tonne from previous days’ close of $22650. Concerns about sovereign debt in the euro zone curbed appetite for assets perceived as risky, as the market looked to development in Greece where the cabinet is expected to outline public sector layoffs, spending cuts and tax increases to secure a bailout installment crucial to avoid running out of money next month. Greece is the front line in a euro-zone sovereign debt crisis that also engulfed Ireland and Portugal and now threatens Italy, Spain and some of Europe’s biggest banks, risking plunging the west back into recession.

In a further positive development for copper, China data for metals trade showed a 21 per cent jump in copper imports on the month in August, although they were still down by nearly 12 per cent from the same month a year ago. China imports of refined copper reached their highest level since January as improved arbitrage spurred spot buying from the world’s top consumer of the metal.

In the London Market, Copper crashed below $8000 a tonne to hit one year lows as economic fears escalated after news of manufacturing contraction in top consumer China and Europe combined with a grim outlook for the US economy. The metal used in power and construction closed at $7674 from $8300 at the close on September 21. It is down about 25 per cent since hitting a record high of $10,190 a tonne in February.