Crude oil prices plunge in hectic week for traders

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Oil tumbled this week after the International Energy Agency agreed to draw on emergency reserves to make up for lost Libyan supplies and as global economic recovery fears prompted demand concerns.

"The big thing this week was really IEA's decision to release 60 million barrels of crude oil over the next month -- taking the teeth out of any possible price spikes in crude oil as we move into higher demand in the third quarter of 2011," said SEB commodities analyst Bjarne Schieldrop.

"So, pre-emptive action from IEA and US politicians to safe-guard the fragile economy as we move into higher oil demand."

However, he cautioned that the impact would be somewhat limited because the move did not solve medium term supply issues.

"On a week-on-week basis, the changes in commodity prices are fairly small since last Friday's close -- except for crude and energy," Schieldrop added.

Agricultural commodities were meanwhile subdued after G20 farming ministers from the world's top economies agreed on action to curb speculative trading blamed for recent food price spikes, at a key meeting in Paris.

The agreement supports establishing an international agricultural market information system, or AMIS, to remedy a chronic lack of output and stocks data that is seen as a major source for price volatility.

OIL: Prices slumped as the IEA, the energy arm of the Organisation for Economic Cooperation and Development, announced it would tap emergency crude reserves of its 28 member nations.

Brent North Sea crude for delivery in August nosedived by a hefty $6.95, or 6.0 percent in value on Thursday.

The IEA sparked a steep sell-off when it announced its decision to release 60 million barrels of crude from strategic oil stocks over the next month, as part of efforts to give the global economy relief from sky-high energy costs.

Prior to the announcement, the market was already buckling under the weight of a stronger dollar, spreading global economic gloom and contagion fears arising from the Greek-eurozone debt crisis.

The shock IEA move is intended to replace output from Libya, where a revolt against longtime leader Moamer Kadhafi has practically halted production.

However, some analysts said Thursday's heavy price falls were overdone in light of the outlook.

"Oil prices have probably overreacted to the IEA's decision to release emergency stockpiles," Capital Economics analyst Julian Jessop said.

"Looking past the recent volatility, the medium-term prospects for oil prices continue to depend primarily on the outlook for demand, geopolitical risks in the Middle East and developments in financial markets more generally."

The IEA has repeatedly called on OPEC to pump more crude to prevent high oil prices threatening the global economic recovery.

Unrest in the crude-producing Middle East and North Africa region has sparked hefty price gains this year, particularly in Libya, where violence has intensified amid the so-called Arab Spring.

"This supply disruption has been underway for some time and its effect has become more pronounced as it has continued," the IEA said on Thursday.

The 12-nation Organization of the Petroleum Exporting Countries (OPEC) -- which pumps 40 percent of world oil -- opted earlier this month to maintain output levels.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in August tumbled to $105.95 a barrel from $112.84.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for August dived to $90.92 a barrel from $92.70 the previous week for the July contract.

PRECIOUS METALS: Gold, silver, platinum and palladium finished the week in negative territory.

"Gold is caught up in the downward pull on commodity markets caused by oil, said Commerzbank analysts.

The dollar meanwhile won support after the Fed confirmed that its second round of bond-buying will end later this month -- signalling that there would be no further stimulus measures.

A stronger US unit makes dollar-priced commodities more expensive for buyers using weaker currencies. This tends to dent demand and prices.

By late Friday on the London Bullion Market, gold dipped to $1,514.75 an ounce from $1,537.50 the previous week.

Silver slid to $34.73 an ounce from $35.39.

On the London Platinum and Palladium Market, platinum dived to $1,696 an ounce from $1,751.

Palladium fell to $739 an ounce from $754.

BASE METALS: Prices traded mixed as downbeat Chinese manufacturing data sparked fears over demand from the Asian powerhouse economy.

"The continued deceleration in China's economy signalled by the flash PMI for June supports our view that commodity prices -- industrial metals in particular -- have further to fall," added Julian Jessop at Capital Economics.

Chinese manufacturing eased to a 10-month low in May, preliminary HSBC data showed Monday, fuelling fears of a slowdown in the world's number two economy and sending Shanghai and Hong Kong shares down.

The HSBC China Purchasing Managers Index (PMI) slipped to 51.1 last month -- the lowest since July 2010 -- from a final reading of 51.8 in April.

A reading above 50 indicates the sector is expanding while a reading below 50 indicates contraction.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months eased to $9,110 a tonne from $9,147 the previous week.

Three-month aluminium dipped to $2,507 a tonne from $2,553.

Three-month lead gained to $2,564 a tonne from $2,477.

Three-month tin slid to $25,100 a tonne from $25,145.

Three-month zinc increased to $2,251 a tonne from $2,216.

Three-month nickel rose to $22,130 a tonne from $21,924.

COCOA: Prices drifted higher.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in September rose to £1,881 a tonne from £1,831 the previous week.

In New York on the NYBOT-ICE, cocoa for September increased to $2,961 a tonne from $2,908.

COFFEE: Coffee prices edged lower in muted trading conditions.

By Friday on NYBOT-ICE, Arabica for September dipped to 250.75 US cents a pound from 254.10 cents the previous week.

On LIFFE, Robusta for delivery in September retreated to $2,329 a tonne from $2,404.

SUGAR: The sugar market enjoyed slender gains on the back of tight global supplies.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October rose to 27.55 US cents a pound from 25.02 cents the previous week.

On LIFFE, the price of a tonne of white sugar for August increased to £733.40 from £720.90.

GRAINS AND SOYA: Corn or maize declined further, after striking a record peak near $8 earlier this month, while prices were also hit by global economic jitters.

"Grains prices have come under marked pressure on macro-economic concerns, sovereign debt risk fears, a firmer dollar and widespread risk reduction," said Barclays Capital analysts.

By Friday on the Chicago Board of Trade, maize for delivery in September fell to $6.68 a bushel from $6.87 a week earlier.

November-dated soyabean meal -- used in animal feed -- slid to $13.13 a bushel from $13.33.

Wheat for September sank to $6.73 from $7.08.

RUBBER: Malaysian rubber prices fell amid a lack of buying interest and improved supplies of raw materials in Thailand and northern Malaysia.

The Malaysian Rubber Board's benchmark SMR20 slipped to 441.10 US cents per kilo from 460.10 US cents the previous week.

© 2011 AFP

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