Commodities slammed by eurozone debt crisis

7th May 2010, Comments 0 comments

Commodity prices mostly sank this week, with oil plunging around ten percent, as trade was rocked by a stronger dollar, sliding stock markets and the eurozone debt crisis that was centred on Greece.

"Crude oil prices have retreated more than ten percent this week, the worst week since the beginning of 2009," Sucden analyst Myrto Sokou told AFP.

"The strengthening US dollar and losses across the global equity markets dampened investor sentiment amid fragile eurozone economic conditions and global uncertainty."

Stock markets across the globe nosedived and the euro plumbed a near 14-month dollar low on mounting concern that the Greek financial crisis could ripple across the eurozone.

OIL: The price of oil slumped this week as the European single currency tumbled on contagion fears about Greece.

"It seems that the eurozone's debt crisis and the strengthening US dollar will continue to dominate the financial markets and could put further pressure on the equity and commodity markets in the near-term," added Sokou.

Crude oil slumped between late Monday and Thursday as the dollar struck 14-month highs against the euro on worries about the stability of the eurozone.

Violent demonstrations in Athens, where three people were killed in a bank firebombing on Wednesday, have rattled investors who fear a 110-billion-euro (145-billion-dollar) EU-IMF bailout for Greece could prove insufficient.

That helped push the euro on Thursday to a low point of 1.2529 dollars -- a level last seen on March 5, 2009.

"The whole commodity complex is primarily driven (currently) by currency market volatility more than anything else," added VTB Capital analyst Andrey Kryuchenkov.

Prices were also weighed down on Thursday by a stunning sell-off on US financial markets and news of rising oil inventories in the United States, indicating weakening demand in the world's largest energy consuming nation.

A stronger greenback makes dollar-denominated oil more expensive for holders of rival currencies, such as the euro, denting demand for energy.

Oil prices had begun the week strongly -- reaching a 19-month high of 87.15 dollars on concerns about a slick in the Gulf of Mexico and positive US economic indicators.

However, worries that the Greek debt crisis may spread to other vulnerable eurozone economies and affect the global economy were dampening investor sentiment, analysts said.

Meanwhile in the Gulf of Mexico on Friday, crews lowered a dome over the oil leak in a bid to contain the sea of crude moving perilously closer to the US coast.

The unprecedented operation is seen as the best hope in staving off the biggest US environmental disaster since the 1989 Exxon Valdez spill in Alaska.

The containment chamber is designed to cap oil discharge from the Deepwater Horizon oil rig operated by British energy giant BP that exploded on April 20, triggering the massive oil spill and killing 11 workers.

Since the explosion, nearly three million gallons of crude have spewed into the sea from a well below the rig.

By late Friday on the New York Mercantile Exchange, Texas light sweet crude for delivery in June plunged to 75.81 dollars from 85.62 dollars a week earlier.

On London's Intercontinental Exchange, Brent North Sea crude for June delivery dived to 78.55 dollars compared with 87.03 dollars.

PRECIOUS METALS: Gold prices stretched to the highest level this year at 1,210.70 dollars per ounce on Thursday as investors sought a safe-haven investment amid the eurozone debt crisis.

That was not far from the record high of 1,226.56 dollars that was struck on December 3, 2009.

"In the wake of much higher risk aversion... investors have continued their flight to safety," said Commerzbank analyst Carsten Fritsch.

By late Friday on the London Bullion Market, gold climbed to 1,202.50 dollars an ounce from 1,179.25 dollars the previous week.

Silver slid to 17.70 dollars dollars an ounce from 18.62 dollars.

On the London Platinum and Palladium Market, platinum fell to 1,651 dollars an ounce from 1,738 dollars.

Palladium dipped to 505 dollars an ounce from 552 dollars.

BASE METALS: Base metals prices slumped.

"Market sentiment remains nervous about the Greek situation as well as, more importantly, potential contagion effects to other economies," said Barclays Capital analyst Nicholas Snowdon.

"In the near term, base metals do appear to remain vulnerable to further market fears relating to the extent of problems in the euro area."

By Friday on the London Metal Exchange, copper for delivery in three months fell to 6,891 dollars a tonne from 7,399 dollars a week earlier.

Three-month aluminium dropped to 2,090 dollars a tonne from 2,207 dollars.

Three-month lead slid to 1,999 dollars a tonne from 2,205 dollars.

Three-month tin dipped to 17,575 dollars a tonne from 18,125 dollars.

Three-month zinc retreated to 2,089 dollars a tonne from 2,282 dollars.

Three-month nickel tumbled to 22,232 dollars a tonne from 25,700 dollars.

GRAINS AND SOYA: Prices mainly fell.

"Widespread weakness swept across the commodities complex," said Barclays Capital analyst Sudakshina Unnikrishnan.

"Agricultural markets came under pressure with macroeconomic uncertainties, a firmer dollar and weak external markets dragging the complex lower."

By Friday on the Chicago Board of Trade, maize for delivery in July eased to 3.70 dollars a bushel from 3.75 dollars the previous week.

July-dated soyabean meal -- used in animal feed -- fell to 9.55 dollars from 9.99 dollars.

Wheat for July firmed to 5.08 dollars a bushel from 5.03 dollars.

COCOA: Cocoa prices struck a record high 2,430 dollars a tonne on keen investment fund buying, before pulling lower as traders cashed in their gains.

By Friday on LIFFE, the price of cocoa for delivery in July fell to 2,368 pounds a tonne from 2,401 pounds the previous week.

On the NYBOT, the July cocoa contract decreased to 3,042 dollars a tonne from 3,231 dollars.

COFFEE: Coffee prices traded mixed.

By Friday on LIFFE, Robusta for delivery in July rose to 1,358 dollars a tonne from 1,319 dollars the previous week.

On the NYBOT, Arabica for July fell to 132.30 US cents a pound from 135.30 cents.

SUGAR: Sugar prices continued to slide, hitting a one-year low at 13 cents a pound.

By Friday on the New York Board of Trade (NYBOT), the price of unrefined sugar for delivery in July fell to 13.64 US cents a pound from 15.12 cents the previous week.

On LIFFE, London's futures exchange, the price of a tonne of white sugar for August dropped to 435.80 from 466.50 pounds.

RUBBER: Malaysian rubber prices dipped on weak demand in regional markets, dealers said.

The Malaysian Rubber Board's benchmark SMR20 dropped to 291.85 US cents per kilo, from 320.25 cents the previous week.


© 2010 AFP

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