Commodities haunted by demand fears as outlook darkens
Published on: Monday, October 20, 2014
LONDON: Commodity markets were haunted by demand fears this week in the face of mounting global economic worries, with crude oil prices striking four-year lows and base metals also suffering heavy falls.Markets around the world have been hammered by worries about the global economy as the eurozone, China and Japan struggle to reignite growth.Those fears increased this week when data from the United States, which has been the only economy showing signs of strength, came in well below expectations. The oil market was also rocked by persistent worries over abundant supplies.
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OIL: Brent hit a fresh four-year low after another sharp sell-off in equities."This week global economic concerns worsened, with economic data indicating slowing growth in both China and the US, the world's two largest oil consumers," said Inenco analyst Dorian Lucas.Brent sank on Thursday to $82.60 – a level last seen on November 23, 2010. New York crude slid to $79.78 per barrel, in the first drop below $80 since June 2012.Both oil contracts have tumbled by around a quarter in value since hitting 2014 highs in June.
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"Oil fundamentals continue to remain bearish following adequate oil supplies in the US and Asia and serious lack of oil demand worldwide," said Sucden analyst Myrto Sokou.Adding to the pain is a supply glut caused by strong US shale production and a return of Libyan oil on to the market after facilities that were closed due to civil unrest resumed operations.
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Crude futures have also tumbled on fears that slowing economic growth will hit demand, leaving an even bigger surplus. The market rebounded Friday on bargain-buying, but analysts expect any gains to be limited, given the current high level of crude supplies and dwindling global demand.Adding to the bearish picture, key producers such as Saudi Arabia are slashing prices to gain market share while maintaining output.Members of the Organization of the Petroleum Exporting Countries (Opec) are keeping up their output levels despite fears over sliding revenues for the cartel. By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in December had sunk to $86.20 a barrel compared with $89.85 for the November contract one week earlier.On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for November recoiled to $83.27 per barrel, from $85.68 a week earlier.PRECIOUS METALS: Gold forged a five-week peak at $1,249.84 per ounce thanks to demand for the perceived safe haven driven by disappointing global data."Gold climbed for a time to a five-week high... on the back of weak US economic data and a resulting significant depreciation of the US dollar," said Commerzbank analysts. The yellow metal won further support from the weaker dollar and worries over the health of bailed-out eurozone member Greece.Gold is regarded by investors as a safe bet in times of economic turmoil.By late Friday on the London Bullion Market, the price of gold had risen to $1,234.25 an ounce from $1,219 a week earlier. Silver increased to $17.36 an ounce from $17.26.On the London Platinum and Palladium Market, platinum firmed to $1,259 an ounce from $1,256. Palladium dropped to $753 an ounce from $784.BASE METALS: Base or industrial metal prices mostly fell on intensifying anxiety over sliding global stock markets, weak demand and faltering world growth."Equity markets fell and fears of a slowdown in global economic growth weighed on metal prices," said Triland Metals analysts. "The fear of the deflation and lack of growth in all major economies has prompt selling across all metals," they added.By Friday on the London Metal Exchange, copper for delivery in three months reversed to $6,615 a tonne from $6,631.50 a week earlier.Three-month aluminium increased to $1,962 a tonne from $1,923.75. Three-month lead decreased to $2,030 a tonne from $2,059.25. Three-month tin sank to $19,426 a tonne from $19,961. Three-month nickel fell to $15,648 a tonne from $16,462. Three-month zinc decreased to $2,245.75 a tonne from $2,313.75.COFFEE: The market pushed lower as some traders cashed in profits following recent sharp gains.By Friday on ICE Futures US, Arabica for delivery in December dipped to 213.20 US cents a pound from 220.80 cents a week earlier.On LIFFE, London's futures exchange, Robusta for November slipped to $2,152 a tonne from $2,186 a week earlier.COCOA: Prices diverged, with traders still on edge about the potential market impact of the Ebola outbreak in west Africa, home to 70 percent of world cocoa production. "The outbreak of the Ebola virus in west Africa remains the main support in the cocoa market, but there are no signs that the virus is spreading to Ivory Coast or Ghana from other countries in the region," said Price Futures Group analyst Jack Scoville.The London-based International Cocoa Organisation (ICCO) added that Ebola-hit Guinea, Liberia and Sierra Leone were only minor cocoa producers."Current international cocoa prices seem to have factored in the Ebola issue and in the absence of a major negative development, we do not expect significant disruption of the market in the medium term," it said in a statement late on Friday.It added: "Regarding the impact of Ebola on the international cocoa sector, it is noted that harvesting and shipping of cocoa in Guinea, Liberia and Sierra Leone have been seriously curtailed."However, combined cocoa production in these three countries represents about 0.7 percent of global output and is likely to have a minor bearing on the global cocoa market."Cocoa had soared last month to 3.5-year peaks on worries that Ebola could hit output in Ivory Coast and Ghana – the two biggest producers which account for 60 percent of the world's cocoa.Industry body ICCO praised Ivory Coast's response to the epidemic, nothing that "the country has yet to register a single case". "The main harvest for cocoa, which runs from October to March... is currently well under way, and stakeholders are making all efforts to ship cocoa from the country as soon as it is available."The ICCO also noted that Ghana had not declared any Ebola cases, while Nigeria was "on its way" to being declared Ebola-free after a handful of cases were "decisively handled" by its government.By Friday on LIFFE, cocoa for delivery in December rose to £2,038 a tonne from £2,029 a week earlier.On the ICE Futures US exchange, cocoa for December reversed to $3,119 a tonne from $3,128 a week earlier.SUGAR: The sugar market drifted lower in subdued trade.By Friday on LIFFE, the price of a tonne of white sugar for delivery in December traded at $426.40 compared with $425.10 a week earlier.On ICE Futures US, the price of unrefined sugar for March fell to 16.59 US cents a pound from 16.63 US cents a week earlier.Stay up-to-date by following Daily Express’s Telegram channel.
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