Oil:
In the New York market oil fell to below $44 a barrel on December 4, its lowest level in nearly four years as more bad US economic news impacted the outlook for global growth and demand for crude. Oil prices have fallen about 70 per cent since peaking at $147.27 in July.
Dismal economic data in the US, pointing toward a sharp contraction of gross domestic product in the fourth quarter and weakening demand for crude products, such as gasoline.
The government said the number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, while the proportion of workers receiving benefits matched a level reached 16 years ago, in September 1992. Factory orders plunged a bigger-than-expected 5.1 per cent in October caused by big cutbacks in demand for steel, autos, computers and heavy machinery. It was the largest decrease since an 8.5 per cent fall in July 2000.
US light crude fell $3.12 to $43.67, the lowest since January 5, 2005. London Brent crude fell $3.16 to $42.28. US stocks fell on December 4 as the continued fall in oil prices pushed down shares in energy companies including Exxon Mobil.
A Commerce Department report showed that factory orders in October plunged 5.1 per cent, the biggest drop since July 2000, and a Labour Department report showed that the number of US workers on jobless benefits rolls was the highest since December 1982.
If the global recession slows China’s economy, it could create an even larger surplus in key commodities. If China’s GDP growth, currently in the 6-8 per cent slows to five per cent or below, commodity prices would lake the hit. Prices may dip below $25 a barrel next year if the recession in developed countries spreads to China, Merrill Lynch & Co. said in a report on December 4. U.S. fuel demand fell 5.2 per cent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said last month.
The crude oil contract for January delivery has fallen $10.76, or 20 per cent to $43.67 a barrel so far this week on the New York Mercantile Exchange. Futures are heading for the biggest one-week drop since the U.S.-led invasion of Iraq in March 2003. Prices have dropped 70 per cent from the record $147.27 a barrel reached on July 11.
Opec members are to meet in Algeria on December 17. Opec members, the producers of 40 per cent of the world’s oil, said at the Cairo meeting that they would wait to gauge the effect of a 1.5 million-barrel-a-day cut agreed to October 24. That reduction was meant to restrict Opec’s daily output by 5.2 per cent, about the same amount that Spain, the world’s ninth-largest economy, uses in a day.
Ministers from the Organization of Petroleum Exporting Countries postponed debate on a second cut in output in as many months during meetings in Cairo November 29. They will wait until later this month, after a slump in global economies and the popping of the commodities bubble sent oil down almost $100 from its record price in July.
Opec has already slashed output twice this year by a total of two million barrels per day (bpd) in response to plunging prices but fears remain that a global recession could ravage demand for energy. The cuts agreed in September and October failed to stop prices sliding under $50 a barrel in November as concern mounted about a recession that has already infected the euro zone and Japan.
Prices are now down by more than 60 per cent from July’s peaks, but analysts have said Opec’s hands were tied because cutting output could damage the world economy even more. At the same time, international oil companies, concerned falling crude may make new exploration projects unprofitable, are curtailing investment plans and slowing projects. That may affect supply when demand does recover.
Producers such as Royal Dutch Shell Plc are cutting back plans to develop deposits like Canadian oil sands. Shell indefinitely postponed the second-phase expansion of its Athabasca project because of rising construction costs. Shell, based in The Hague, also delayed seeking regulatory approval for Carmon Creek. Higher cost plans require $80 a barrel oil to be profitable, according to Merrill Lynch.
In its latest monthly oil market report, Opec’s Vienna-based secretariat said it now expected oil demand to rise by 490,000 b/d in 2009, down from a previous estimate of 760,000 b/d. In outright terms, Opec cut its estimate of world oil demand in 2008 by 260,000 b/d to 86.19 million b/d, and reduced the same figure from 2009 by 530,000 b/d to 86.68 million b/d.
Demand growth next year is expected to be largely confined to China and the Middle East, with consumption in the developed countries making up the OECD falling to 47.42 million b/d from this year’s expected average of 48.01 million b/d.
The downbeat economic forecasts have darkened the outlook for oil demand substantially. The global economy is slowing down faster than expected, which is being reflected in downward revisions of forecasts for economic growth for the rest of 2008 and for 2009.
Aluminium
On December 4, in the New York market aluminium prices have touched four and a half year lows. Aluminium touched $1,576 a tonne, its lowest since May 2004. Both aluminium and copper fell sharply after the BoE slashed interest rates by a full percentage point to 2.0 per cent and the ECB cut its borrowing rates by a greater than expected 75 basis points to 2.5 per cent.
Aluminium, used in transport and packaging, has fallen more than 50 per cent since hitting a record high of $3,380 in July. Stocks of aluminium in LME warehouses rose 19,500 tonnes to 1.85 million tones, the highest since November 1994. Copper for three-month delivery on the London Metal Exchange dropped as much as 5.5 per cent to $3,258 a tonne, its lowest price since July 2005.
Prices of the metal used in power and construction have fallen about 60 per cent since a record high of $8,940 in July. The said the size of the decline in industrial metal prices had been exaggerated by funds exiting.
Japanese trading firm Marubeni Corp said recently a surplus of aluminium in the global market would ease in 2009 due to a drop in supply and a tepid recovery in demand as the financial crisis hurts global growth.
The global market surplus in aluminium would narrow sharply in 2009 than this year, while the overall recovery in supply would be marginal, due to an expected tumble in US supply and a much tamer rise in Chinese supply compared with 2008.
Global surplus of 534,000 tonnes was forecast for 2009, down from an expected surplus of 1,257,000 tonnes this year. A surplus of 346,000 tonnes was expected for 2010. Global demand for primary aluminium is expected to rise 2.9 per cent to 39.98 million tones in 2009, while supply is expected to inch up 1 per cent to 40.5 million tones. In 2010, global demand is expected to rise six per cent from 2009 to 42.39 million tones, while supply is expected to rise 5.5 per cent to 42.74 million tones.
Aluminium prices had been hit hard by the deepening downturn in global economies and a bleak growth outlook, as well as investors dumping assets for cash as risk aversion intensified in the wake of the global financial crisis. Inventories were expected to keep rising into 2009 but the buildup was likely to moderate later in the year as supply tightened, the company said.
Benchmark three-month London Metal Exchange aluminium futures were expected to average $2,100 a tonne in 2009 and move in a range of $1,700-$2,500 during the year. In 2010, three-month LME futures are forecast to average $2,400 and likely to move in a range of $2,000-$2,800.
Gold
Gold prices which had risen sharply and briefly touched record levels above $1000/oz in mid March have since fallen. Gold has lost roughly 25 per cent since mid Summer. Despite a five-month drop in prices, world gold demand increased 18 per cent, and made a new all-time record high in term of dollars as lower prices encouraged investors to World gold demand totaled 1,133.4 t8onnes during the third-quarter. This was up 170.1 tonnes, or 18 per cent, from levels of a year earlier.
In dollar terms, this represented a 51 per cent rise to $31.8 billion, an all-time record high! This is a 45 per cent leap from the previous record set during the second-quarter, and a major indicator that the gold bull market is still on track. The biggest contributor to the increase in total world gold demand in third-quarter was identifiable investment, which was up 137.5 tonnes, or 56 per cent, relative to year-earlier levels.
Driving the improvement in identifiable investment was net retail investment, which increased 121 per cent from 105.1 tonnes to 232.1 tonnes. Switzerland, Germany, India and the United States enjoyed the biggest surge in demand, although shortages of bars and coins were reported among bullion dealers in many parts of the world.
Dear visitor, the comments section is undergoing an overhaul and will return soon.