Oil, metals and sugar prices all slumped this week to new lows, weighed down by ample supplies and a strong dollar, analysts said. “Commodity prices have had a weak start to August as concerns about China’s demand continue to weigh on investor sentiment, particularly towards energy and industrial commodities,” Capital Economics research group said in note to clients on Friday.
OIL: Prices hit multi-month lows Friday, extending a prolonged losing run caused by a global supply glut. Excess crude supply is seen as the main driver for a slump in oil price of more than 50 percent since mid-2014. Brent North Sea crude on Friday hit a six-month low at $48.55 a barrel, while New York prices struck a 4.5-month trough at $43.94.
“Crude oil prices continue to trade under significant pressure owing to ample global supplies and an unimpressive demand outlook,” Kash Kamal, senior analyst at Sucden Financial Research, said on Friday. The United States is producing oil from shale rock at high levels and output by the Organisation of Petroleum Exporting Countries continues to exceed the cartel’s quota of 30 million barrels a day as Opec seeks to maintain market share. The US Department of Energy on Wednesday said crude stockpiles in the world’s top consumer slid 4.4 million barrels in the week through July 31, indicating robust demand.
But it also showed US production rising by 52,000 barrels a day to 9.5 million barrels daily, rebounding from the previous week’s dip. The dollar, which remains strong despite falling Friday on a mixed US jobs report, is also weighing on oil.
A strong dollar discourages crude purchases outside the United States because oil is priced in the US currency. Investors also are looking ahead to additional supplies of oil coming onto the market as part of last month’s historic deal between six major powers and Iran over its nuclear programme. In exchange for curbing its suspected nuclear activities, Tehran will see the lifting of sanctions, which have slashed its oil exports.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in September slumped to $49.02 a barrel from $52.69 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for September slid to $44.21 a barrel from $47.66.
PRECIOUS METALS: Gold fell further, while platinum and palladium struck multi-year low points. Platinum hit $945.20 an ounce – the lowest level for five and a half years, while palladium dropped to an almost three-year trough at $589.30 an ounce. Silver managed a rise.
“The sentiment in gold and other metal markets has been turning increasingly negative during the past month,” said Saxo Bank analyst Ole Hansen. “No signs of inflation combined with rising bond yields, collapsing emerging market currencies, no safe-haven demand, a rising dollar, and rising expectations of an early US rate hike have all helped trigger an exodus out of gold,” he added. By Friday on the London Bullion Market, the price of gold dipped to $1,093.50 an ounce from $1,098.40 a week earlier. Silver climbed to $14.75 an ounce from $14.56. On the London Platinum and Palladium Market, platinum slipped to $946 an ounce from $979.
Palladium dropped to $602 an ounce from $610.
BASE METALS: Prices remained pressured by more disappointing Chinese data. A private survey of Chinese manufacturing activity released Monday showed a decline to a two-year low, suggesting the world’s second largest economy faces challenges in the third quarter. The final reading of Caixin’s Purchasing Managers’ Index (PMI)came in at 47.8 for July. The figure was below the 49.4 registered in June and was the weakest reading since 47.7 in July 2013. A figure above 50 signals growth and anything below indicates contraction.
On commodity markets, there were five-year lows for copper at $5,121 a tonne, aluminium at $1,576 a tonne with lead dropping to $1,672 a tonne. “The recent decline in commodities prices is reminiscent of last year’s sharp falls, which were an indicator of much weaker-than-expected growth in emerging markets,” Barclays said in a note to clients. It noted however that this time around the decline in prices generally for base, or industrial, metals “seems more linked” to oversupply. By Friday on the London Metal Exchange, copper for delivery in three months fell to $5,162 a tonne from $5,218.50 a week earlier.
— Three-month aluminium dropped to $1,594.50 a tonne from $1,631.50.
— Three-month lead slid to $1,693 a tonne from $1,703.50
— Three-month tin declined to $15,305 a tonne from $16,105.
— Three-month nickel retreated to $10,845 a tonne from $10,940.
— Three-month zinc decreased to $1,853 a tonne from $1,942.
SUGAR: Prices fell to 10.64 US cents a pound in New York – the lowest level for six and a half years. In London, they hit $342.80 a tonne – the lowest point for five and a half years.
“One reason for the low sugar price is the weak Brazilian real (against the dollar), which makes it attractive for Brazilian exporters to sell raw sugar from the ongoing harvest on the world markets,” said analysts at Commerzbank. By Friday on Liffe, London’s futures exchange, a tonne of white sugar for delivery in October dropped to $348.50 from $354 one week earlier. On the ICE Futures US exchange, unrefined sugar for September fell to 10.87 US cents a pound from 11.32 cents.
COCOA: Futures fell back. By Friday on Liffe, cocoa for delivery in December slipped to £2,043 a tonne from £2,154 a week earlier. On ICE Futures US, cocoa for September slid to $3,028 a tonne from $3,237.
COFFEE: Prices slipped. By Friday on Liffe, Robusta for September retreated to $1,649 a tonne from $1,667 one week earlier. On ICE Futures US, Arabica for delivery in September fell to 126.60 US cents a pound from 127.45 cents.
RUBBER: Prices declined mainly on concerns about falling Chinese demand, traders said. On Friday, the Malaysian Rubber Board’s benchmark SMR20 fell to 155.00 US cents a kilo from 157.05 US cents a week earlier.