Commodity prices retreat on global economy strains

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Commodity prices slumped this week on increasing worries about the future of the eurozone, the possibility of fresh recession in major economies and a Chinese manufacturing slowdown, analysts said.

Traders meanwhile reacted to news that the Federal Open Market Committee (FOMC) left US interest rates near zero percent and reiterated its promise to keep interest rates at "exceptionally low levels... at least through mid-2013."

OIL: Crude oil prices retreated due to weaker economic prospects in energy powerhouse China and debt-laden Europe, analysts said.

"Crude fell... as investors remained cautious about prospects for economic growth in Europe and China," said Ker Chung Yang, an analyst at Phillip Futures in Singapore.

Despite a successful Spanish bond issue on Thursday which sent European shares and the euro higher, doubts still lingered over the eurozone's ability to recover from its debt crisis.

Worries over the eurozone's economic health as well as the moribund US economy also spilled over to China, which saw its manufacturing activity decline and foreign direct investment fall for the first time in 28 months.

A senior Chinese government researcher forecast Beijing's exports growth would halve in 2012 from this year, pulling the pace of economic expansion below nine percent for the first time in more than a decade.

China is the world's largest energy consumer and a hit to its economy will have serious ramifications for the oil industry.

Elsewhere this week, OPEC agreed to maintain current oil production of 30 million barrels per day (mbpd), citing an uncertain outlook for world energy demand.

The International Energy Agency (IEA) said Tuesday that OPEC produced 30.68 mbpd last month as Saudi Arabia and Kuwait pumped extra crude as Libya works towards returning to pre-war output levels.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in February stood at $103.95 a barrel compared with $108.92 for the expired January contract a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for January slid to $94.01 a barrel from $98.38.

PRECIOUS METALS: Prices slid, with gold striking the lowest level for three months.

"Gold prices have already been battling dollar strength, risk reduction and the need for liquidity but the downside was exacerbated this week by the FOMC statement ... and important technical support levels being breached amid soft physical demand," said Barclays Capital analyst Suki Cooper.

By late Friday on the London Bullion Market, gold slid to $1,594 an ounce from $1,709 the previous week.

Silver dropped to $29.78 an ounce from $32.00.

On the London Platinum and Palladium Market, platinum fell to $1,424 an ounce from $1,496.

Palladium retreated to $624 an ounce from $670.

BASE METALS: Prices mostly retreated.

"The metals took a tumble as concerns over Europe escalated," said Fast Markets analyst William Adams.

"Overall ... we feel the economic and financial situation is likely to carry prices lower" in coming months.

By late Friday on the London Metal Exchange, copper for delivery in three months slid to $7,345 a tonne from $7,750 the previous week.

Three-month aluminium dropped to $2,008 a tonne from $2,080.

Three-month lead fell to $1,990 a tonne from $2,105.

Three-month tin retreated to $18,775 a tonne from $20,100.

Three-month zinc slipped to $1,865 a tonne from $1,992.

Three-month nickel was unchanged at $18,500 a tonne.

COCOA: Prices rebounded sharply on expectations of a supply deficit.

The turnaround came after cocoa hit the lowest level in more than three years on Monday, at £1,232 a tonne in London, because for a long time it had been expected that there would be excess supplies of the commodity next year.

Sentiment changed however later in the week, with cocoa soaring to £1,482 a tonne, following a forecast that demand would in fact outstrip supplies.

"Cocoa trader Olam International's expectation of a 100 thousand tonne deficit on the world cocoa market in the current season has given wings to cocoa prices," said Commerzbank analyst Carsten Fritsch.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in March jumped to £1,399 a tonne from £1,337 a week earlier.

In New York on the NYBOT-ICE, cocoa for March gained to $2,164 a tonne from $2,082.

COFFEE: Coffee futures fell to a one-year low of 216.55 US cents a pound "amid mounting concerns over the debt crisis in Europe and fears of a global economic slowdown," said commodities publication The Public Ledger.

By Friday on LIFFE, Robusta for delivery in March stood at $1,903 a tonne compared with $1,924 for the January contract a week earlier.

On NYBOT-ICE, Arabica for March slipped to 218 US cents a pound from 229.75 cents.

SUGAR: Prices extended recent losses.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in March fell to 22.97 US cents a pound from 23.50 cents a week earlier.

On LIFFE, the price of a tonne of white sugar for March dropped to $600.50 from $611.

GRAINS AND SOYA: Maize and wheat futures fell while soya rose.

By Friday on the Chicago Board of Trade, maize for delivery in March dropped to $5.83 a bushel from $5.89 a week earlier.

Wheat for December also slipped to $5.83 a bushel from $5.96.

January-dated soyabean meal -- used in animal feed -- climbed to $11.25 a bushel from $11.08.

RUBBER: : Rubber prices fell on lower demand.

The Malaysian Rubber Board's benchmark SMR20 slipped to 331.05 US cents a kilo from 340.45 cents the previous week.


© 2011 AFP

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