Commodity prices tumble on weak US data, eurozone fears

4th June 2010, Comments 0 comments

Commodities tumbled this week on disappointing US payrolls data and intensifying concerns over the eurozone debt crisis but cocoa bucked the trend, hitting a near 33-year peak on tight supplies and keen chocolate demand.

"Commodity prices have remained under pressure as a hostile external environment and nervous financial markets refuse to relent their stranglehold on prices," said Barclays Capital analyst Sudakshina Unnikrishnan.

Many dollar-priced commodities also took a hit from the stronger dolllar, which soared against the euro, as contagion fears grew over the eurozone crisis.

The European single currency slumped in late afternoon deals on Friday, striking 1.1980 dollars -- its lowest point since March 24, 2006.

A stronger US unit tends to dampen demand for dollar-priced commodities which become more expensive for buyers using weaker currencies. In turn, that pushes prices downwards.

OIL: World oil prices plunged by almost three dollars on Friday after a much weaker-than-expected US nonfarm payrolls report sparked concern about the strength of economic recovery in top energy consumer the United States.

The US economy created 431,000 nonfarm jobs in May, well short of the 500,000 expected by most analysts, official data showed.

More worrying, the private sector created only 41,000 jobs as the bulk of the new jobs came from temporary government hiring for a US census. Most analysts had expected 226,000 private payrolls to be added.

The unemployment rate slipped to 9.7 percent from 9.9 percent in April as the labour force contracted.

"The US payroll figures did manage to surprise the energy market on the negative side," said Sucden research analyst Myrto Sokou in London.

"The energy market over-reacted and crude oil prices fell towards 73 dollars per barrel, getting also some pressure from the strengthening US dollar.

"However, investors should also remember that US driving and hurricane seasons have just started, showing some encouraging signs for the energy market in the near-term."

An increase in road traffic should boost demand for gasoline (petrol) while hurricanes often disrupt offshore oil production in the Gulf of Mexico, forcing up prices.

At the start of the week, oil fell as series of sluggish European and Chinese economic indicators prompted concerns about global energy demand.

Data on Tuesday showed that the eurozone unemployment rate rose to a record 10.1 percent in April from 10 percent in March, while eurozone manufacturing activity slowed in May to a level not seen since the collapse of US investment bank Lehman Brothers in September 2008.

In China, the world's second-biggest energy consumer, manufacturing activity also slowed in May as government brakes to keep the economy from overheating kicked in.

Any weakness in China unsettles the oil market, which is depending on the Asian giant as the leading driver of growth in global energy demand amid a fragile recovery from recession.

However, oil rose on Thursday after the US weekly oil inventories report showed a larger-than-expected dip in gasoline inventories.

By late Friday on the New York Mercantile Exchange, Texas light sweet crude for delivery in July slumped to 71.78 dollars a barrel from 74.58 dollars a week earlier.

On London's Intercontinental Exchange, Brent North Sea crude for July delivery tumbled to 72.58 dollars from 74.63 dollars.

PRECIOUS METALS: Prices fell in line with most other commodities.

"This decline in prices ... is to be attributed to a reduced risk aversion," said Commerzbank analyst Carsten Fritsch.

Gold hit an all-time high of 1,249.40 dollars an ounce in early May as eurozone crisis fears saw investors getting into the safe-haven metal.

By late Friday on the London Bullion Market, gold prices eased to 1,203.50 dollars an ounce from 1,207.50 dollars the previous week.

Silver fell to 17.76 dollars an ounce from 18.53 dollars.

On the London Platinum and Palladium Market, platinum sank to 1,527 dollars an ounce from 1,555 dollars.

Palladium tumbled to 440 dollars an ounce from 471 dollars.

BASE METALS: Base metals were hit by the poor manufacturing data from key consumer China.

"Bearish Chinese sentiment dragged the base metal prices lower following disappointing Chinese manufacturing figures that raised concerns over potential easing of growth," Sokou said.

By Friday on the London Metal Exchange, copper for delivery in three months slumped to 6,292 dollars a tonne from 6,991 dollars a week earlier.

Three-month aluminium tumbled to 1,890 dollars a tonne from 2,075 dollars.

Three-month lead fell to 1,602 dollars a tonne from 1,868 dollars.

Three-month tin plunged to 16,000 dollars a tonne from 18,200 dollars.

Three-month zinc slid to 1,659 dollars a tonne from 1,942 dollars.

Three-month nickel decreased to 18,125 dollars a tonne from 21,630 dollars.

COCOA: Cocoa soared to the highest level for nearly 33 years, hitting 2,606 pounds per tonne in London.

"Strength (in prices) was linked to the tight supply situation and expectations for a pick up in consumer demand for chocolate," said the Public Ledger commodities review.

By Friday on LIFFE -- London's futures exchange -- the price of cocoa for delivery in July jumped to 2,581 pounds a tonne from 2,437 pounds the previous week.

On the NYBOT, the September cocoa contract eased to 2,982 dollars a tonne from 2,985 dollars.

GRAINS AND SOYA: Maize and wheat prices were mixed, while soyabeans gained some ground.

By Friday on the Chicago Board of Trade, maize for delivery in July slid to 3.45 dollars a bushel from 3.59 dollars the previous week.

July-dated soyabean meal -- used in animal feed -- climbed to 9.43 dollars from 9.37 dollars.

Wheat for July dropped to 4.39 dollars a bushel from 4.57 dollars.

COFFEE: Coffee prices edged higher in muted trade.

By Friday on LIFFE, Robusta for delivery in September firmed to 1,375 dollars a tonne from 1,333 dollars the previous week.

On the NYBOT, Arabica for July gained to 134.80 US cents a pound from 135 cents.

SUGAR: Sugar prices declined.

By Friday on the New York Board of Trade (NYBOT), the price of unrefined sugar for delivery in July dropped to 14.65 US cents a pound from 14.83 cents the previous week.

On LIFFE, the price of a tonne of white sugar for August slid to 466.20 pounds from 475.80 pounds.

RUBBER: Malaysian rubber prices inched higher.

The Malaysian Rubber Board's benchmark SMR20 contract rose to 291.45 US cents a kilo on Friday from 287.80 US cents the previous week.

© 2010 AFP

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