Commodity prices rise amid economic turbulence

27th May 2011, Comments 0 comments

Commodity prices advanced during a volatile trading week in which investors weighed up the impact of weak US economic growth and an escalating European debt crisis on demand for raw materials.

They also tracked signs of slowing output in commodities-hungry China.

OIL: Crude oil prices rose as dealers tracked the dollar's fortunes, weak US data, energy demand concerns and renewed jitters over the eurozone debt crisis.

"Trading conditions continue to remain uncertain, following fairly disappointing economic data from the US and eurozone, uncertainty about a potential debt-restructure in Greece and weaker oil demand from the US, China and Japan," said Myrto Sokou, an analyst at Sucden brokers in London.

Oil prices began the week with sharp losses, tumbling on Monday as the dollar strengthened on the back of more European debt problems.

Prices were also pushed lower by indications of slowing economic growth in China but then picked up sharply on Tuesday as US banks Goldman Sachs and Morgan Stanley raised their 2012 forecasts for Brent to around $130 a barrel.

Data on Wednesday, showing a surprise increase in American crude stockpiles, took the gloss of that performance.

US crude reserves rose by 600,000 barrels in the week to May 20, confounding expectations of a fall and indicating weak demand, while gasoline (petrol) inventories jumped a huge 3.8 million barrels, in contrast to predictions of a drop.

Gasoline demand is expected however to pick up in the coming weeks as Americans take to the road for their summer holidays.

Highlighting the week's volatility, the oil market sank further on Thursday as disappointing US economic data dented investor confidence, before rebounding on Friday.

The markets were hoping for an upward revision from the initial reading of 1.8 percent in first-quarter US growth -- but the figures were left unchanged.

Economists said the data showed consumer spending was weaker than previously believed, with the high cost of food and fuel likely the reason.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in July was higher at $114.67 a barrel from $110.92 the previous week.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for July climbed to $100.35 a barrel from $97.41.

PRECIOUS METALS: Prices rallied across the precious metals complex, with gold benefiting from its status as a safe investment in troubled economic times.

"With the situation in Greece threatening contagion to other peripheral Eurozone nations, the world's macro-economic situation still in a state of flux and many nations still facing the threat of rising inflation and negative real interest rates we continue to expect dip buying interest into the likes of gold and silver as a safe-haven hedge," said James Moore, an analyst at Fastmarkets research group.

By late Friday on the London Bullion Market, gold jumped to $1,533 an ounce from $1,491 the previous week.

Silver rose to $37.69 an ounce from $34.80.

On the London Platinum and Palladium Market, platinum climbed to $1,779 an ounce from $1,767.

Palladium gained to $757 an ounce from $734.

BASE METALS: Industrial metals prices mostly rose after a turbulent start to the week. Copper shed 3.0 percent while nickel and tin dived 5.0 percent on Monday after data showed China's economy slowing.

Chinese manufacturing eased to a 10-month low point in May, HSBC bank data showed, fuelling fears of a slowdown in the world's number two economy.

"Metals were battered Monday. .. hit by a double-whammy of a stronger dollar and clearer signs of decelerating economic growth now becoming evident from a number of regions," said Edward Meir, an analyst at MF Global brokers.

Base metals quickly recovered however, helped by Goldman Sachs' "bullish call for commodities going forward," said Meir.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months climbed to $9,184 a tonne from $9,040 the previous week.

Three-month aluminium was higher at $2,601 a tonne from $2,526.75.

Three-month lead rose to $2,514 a tonne from $2,486.

Three-month tin fell to $27,300 a tonne from $28,175.

Three-month zinc gained to $2,279 a tonne from $2,169.

Three-month nickel dropped to $23,025 a tonne from $23,485.

COCOA: Prices rebounded as normality returns to leading cocoa producer Ivory Coast after recent bloody unrest.

President Alassane Ouattara on Thursday urged Ivorians living abroad to return home and help the country recover from a bitterly contested election that turned violent.

Ouattara formally took over as head of state earlier this month after his supporters ousted former president Laurent Gbagbo who had refused to accept that his rival had won a November election recognised by the international community.

Nearly 3,000 people died in the months of violence that followed the vote, according to the new government, and tens of thousands fled into neighbouring countries. Cocoa exports were also temporarily halted.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in July rose to £1,848 a tonne from £1,835 the previous week.

In New York on the NYBOT-ICE, cocoa for July increased to $3,020 a tonne from $2,936.

COFFEE: Coffee futures advanced as demand outstrips supplies.

"Demand for Arabica coffee ... increasing at a much faster rate than supply will encourage producers, particularly in the developing world, to step up production," said Barclays Capital analyst Sudakshina Unnikrishnan.

By Friday on NYBOT-ICE, Arabica for July was higher at 269.55 US cents a pound from 264.80 cents the previous week.

On LIFFE, Robusta for delivery in July firmed to $2,603 a tonne from $2,565.

SUGAR: Sugar built on recent gains as supplies dropped in leading producer Brazil.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in July rose to 22.85 US cents a pound from 22.15 cents the previous week.

On LIFFE, the price of a tonne of white sugar for August increased to £656.60 from £620.70.

GRAINS AND SOYA: Wheat and soya prices rose while maize fell.

By Friday on the Chicago Board of Trade, maize for delivery in July dropped to $7.49 a bushel from $7.59 a week earlier.

July-dated soyabean meal -- used in animal feed -- rose to $13.87 a bushel from $13.80.

Wheat for July was up to $8.10 from $8.06.

RUBBER: Malaysian rubber prices rose amid tight supplies.

The Malaysian Rubber Board's benchmark SMR20 climbed to 465.20 US cents a kilo from 455.40 US cents the previous week.

© 2011 AFP

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