Commodity prices mostly drop on eurozone jitters

4th November 2011, Comments 0 comments

Commodity prices mainly fell this week with market sentiment dominated by a eurozone debt crisis that overshadowed a shock interest rate cut by the European Central Bank and drop in US unemployment.

"The past week has reflected price swings in commodity markets linked to the broader macro backdrop, as heightened uncertainty surrounding the eurozone sovereign debt crisis caused volatile price action," said Barclays Capital analyst Sudakshina Unnikrishnan.

Greece on Friday announced that it had scrapped plans to hold a referendum on a debt bailout central to its recovery and that of the eurozone.

It came as the G20 of developed and developing nations, meeting at a summit in France, failed to agree a figure for a boost in International Monetary Fund resources so as help struggling countries in need of fresh finance.

OIL: Oil prices rose as traders closely watched eurozone debt developments.

"Oil prices are still being driven by external factors primarily. News that the planned (Greek) referendum ... had been cancelled gave a lift to prices," said Commerzbank analyst Carsten Fritsch.

"Furthermore, the surprising interest rate cut by the ECB added to the positive mood, as it was interpreted by most market players as a growth enhancing factor."

The new head of the European Central Bank, Mario Draghi, surprised markets with a rate cut at his first policy-setting meeting on Thursday, citing "high uncertainty" and "intensified downside risks" for the 17-nation eurozone.

The ECB lowered its key rate to 1.25 percent from 1.50 percent.

"In view of the apparent U-turn by the ECB to a more growth-oriented monetary policy and the smaller likelihood now of a default by Greece in the near future, oil prices should remain well supported initially," Fritsch said.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in December rose to $111.40 a barrel from $110.10 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for December, was up at $93.92 from $92.89.

PRECIOUS METALS: Gold edged higher.

"Gold can be expected to enjoy continued strong demand as a store of value and a safe haven amid the many U-turns we have seen during the Greek crisis," said analysts at Commerzbank.

By late Friday on the London Bullion Market, gold edged up to $1,749 an ounce from $1,741 the previous week.

Silver fell to $33.95 an ounce from $35.42.

On the London Platinum and Palladium Market, platinum dipped to $1,623.50 an ounce from $1,629.

Palladium slipped to $652 an ounce from $659.

BASE METALS: Prices of industrial metals were mixed.

"Base metals continue to be politically-driven as the extraordinary events in the eurozone continue to unfold," said Credit Agricole analyst Robin Bhar.

"Largely constructive supply/demand fundamentals of the metals simply don't matter for the moment as market participants worry more about a Greek sovereign debt default and the risk of contagion to other weaker peripheral countries and a possible collapse of the euro."

By late Friday on the London Metal Exchange, copper for delivery in three months fell to $7,832 a tonne from $8,030 the previous week.

Three-month aluminium dropped to $2,143 a tonne from $2,238.

Three-month lead rose to $2,031 a tonne from $2,011.

Three-month tin increased to $22,100 a tonne from $21,850.

Three-month zinc climbed to $1,943 a tonne from $1,928.

Three-month nickel retreated to $18,550 a tonne from $19,769.

COCOA: Cocoa hit the lowest level for more than two years, at $1,626 a tonne, on high supplies and eurozone jitters.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in December fell to £1,689 a tonne from £1,701 the previous week.

In New York on the NYBOT-ICE, cocoa for December decreased to $2,730 a tonne from $2,737.

COFFEE: Coffee prices hit an 11-month low at $1,784 in London.

By Friday on LIFFE, Robusta for delivery in January declined to $1,819 a tonne from $1,878 a week earlier.

On NYBOT-ICE, Arabica for December dropped to 227.80 US cents a pound from 238 US cents.

SUGAR: Prices retreated on both sides of the Atlantic.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in March slipped to 25.79 US cents a pound from 26.76 cents a week earlier.

On LIFFE, the price of a tonne of white sugar for December slid to £679 from £707.

RUBBER: Rubber prices fell as buyers stayed away amid the deepening European debt crisis and despite tight supplies caused by flooding in top rubber producer Thailand.

The Malaysian Rubber Board's benchmark SMR20 fell to 368.30 US cents a kilo from 404.35 the previous week.


© 2011 AFP

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