Commodities face rollercoaster week on Ukraine crisis

7th March 2014, Comments 0 comments

Global commodities experienced volatile trade this week on worries over Ukraine, with oil spiking before sliding on receding tensions, while gold sparkled as investors sought shelter from the crisis.

Sentiment was also hit by demand concerns after more weak data from the Asian powerhouse China, a top consumer of raw materials.

Elsewhere, drought conditions in Brazil sent coffee and sugar prices soaring to major peaks on supply concerns.

Traders drew some strength on Friday from better-than-expected US non-farm payrolls data in the world's biggest economy.

- Crude oil prices bounce -

OIL: The oil market spiked on Monday to the highest levels this year as the Ukraine crisis raised concerns about disruptions to energy supplies.

But prices then fell back on Tuesday as Russian President Vladimir Putin declared there was "no need" yet to send troops into Ukraine.

Crude futures retreated as fears of an immediate armed conflict in Ukraine receded, but analysts said the presence of Russian-backed troops in the Crimean peninsula continued to support prices.

Russia faces sanctions from the US and Europeans which potentially could wreak turmoil in markets -- especially as Russia is a crucial global energy producer and exporter of natural gas to Western Europe.

More than 70 percent of its gas and oil exports to Europe pass through Ukraine.

Markets were also hit on Wednesday by fresh concerns over growth in China, which is the world's second biggest crude consuming nation.

China's National People's Congress began its annual meeting on Wednesday, with Premier Li Keqiang saying the government was targeting 7.5 growth in 2014, unchanged from last year's forecast.

The figure is below the 7.7 percent recorded in 2013 and 2012, and is the lowest growth rate since 1999.

The market took another knock on Wednesday after the US Department of Energy said commercial crude-oil inventories rose by 1.4 million barrels in the week ending February 28.

That was more than expectations of a 1.0 million barrel gain, indicating demand that was weaker than expected for the world's largest crude-oil consumer.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in April dipped to $108.54 a barrel from $108.99 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for April eased to $102.52 per barrel from $102.59.

- Haven investment gold shines -

PRECIOUS METALS: Gold touched a four-month high at $1,354.87 an ounce as investors sought safety amid the Ukraine crisis.

"The price rise came on the back of the increasing tensions between Russia and Ukraine, which sparked greater demand for gold as a safe haven," said Commerzbank analyst Daniel Briesemann.

Gold is regarded as a safe investment in times of economic or political uncertainty.

By late Friday on the London Bullion Market, the price of gold grew to $1,335.25 an ounce from $1,326.50 a week earlier.

Silver rose to $21.38 an ounce from $21.27.

On the London Platinum and Palladium Market, platinum increased to $1,474 an ounce from $1,447.

Palladium climbed to $776 an ounce from $743.

BASE METALS: Aluminium, copper and lead struck multi-month lows, partly because of poor data in key consumer China.

"The prices of many of the key industrial metals have continued to fall since the beginning of this year amid concerns about the risk of a slowdown in Chinese demand after disappointing PMI readings in both January and February," said Capital Economics research group.

Chinese manufacturing activity contracted in February at its worst rate in seven months, British banking giant HSBC said Monday, the latest data indicating trouble in the world's number two economy.

HSBC said its final purchasing managers' index (PMI) for China, which tracks manufacturing activity in factories and workshops, fell to 48.5 last month.

It was a slight increase on the flash PMI of 48.3 but it remained the weakest reading since July. A reading above 50 indicates growth, while anything below signals contraction.

By Friday on the London Metal Exchange, copper for delivery in three months fell to $6,854 a tonne from $7,009 week earlier.

Three-month aluminium rose to $1,766.75 a tonne from $1,762.

Three-month lead dipped to $2,108 a tonne from $2,134.

Three-month tin decreased to $23,100 a tonne from $23,499.

Three-month nickel gained to $15,388 a tonne from $14,550.

Three-month zinc grew to $2,070.75 a tonne from $2,064.75.

- Coffee, sugar hit heights -

COFFEE: Prices spiked to a two-year pinnacle in New York, as traders fretted once more over drought conditions in key producer Brazil.

"Arabica coffee now costs more than 200 US cents per pound again for the first time in two years," said Commerzbank analyst Michaela Kuhl.

"The dry weather in the Brazilian growing areas is still keeping the markets on tenterhooks."

Arabica-quality coffee, which has surged close to 80 percent in value since the start of the year, reached 204.10 US cents a pound on Wednesday, the highest level since early March 2012.

Robusta meanwhile hit a near one-year peak at $2,136 a tonne on Tuesday.

"The main focus of the market is still on Brazil," added Price Futures Group analyst Jack Scoville.

"The lack of rain in coffee producing areas over the last month has hurt coffee production potential.

"Traders also keep waiting for more coffee to appear from Vietnam. Exports so far this year from Vietnam have been disappointing."

By Friday on ICE Futures US, Arabica for delivery in May leapt to 196.05 US cents a pound from 179.25 cents a week earlier.

On LIFFE, Robusta for May jumped to $2,076 a tonne from $2,038.

SUGAR: Prices scaled more four-month highs on drought conditions in Brazil.

"Weather conditions in key production areas around the world are rated as mostly good except for the dry weather in Brazil," added Scoville.

"Traders are watching Ukraine and Russia as both are important sugarbeet producers, although this production stays at home.

"Any losses in either country could increase world demand."

By Friday on LIFFE, the price of a tonne of white sugar for delivery in May increased to $484.70 from $476.30 a week earlier.

On ICE Futures US, the price of unrefined sugar for delivery in May gained to 18.31 US cents a pound from 17.74 US cents.

COCOA: Prices steadied after striking recent 2.5 year highs on the back of stretched global supplies.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in May rose to £1,845 a tonne from £1,838 a week earlier.

On the ICE Futures US exchange, cocoa for May eased to $2,962 a tonne from $2,969.

RUBBER: Prices in Kuala Lumpur rebounded as low production from leading rubber producers squeezed global supplies.

The Malaysian Rubber Board's benchmark SMR20 advanced to 195.40 US cents a kilo from 188.70 cents a week earlier.

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© 2014 AFP

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