Commodity prices slump on debt woes

Commodity prices slumped this week as confidence in the global economy was shaken by growing fears about soaring European debt and weaker-than-expected US jobs data.

“Commodity markets continue to be held hostage by volatile external markets, dollar fluctuations, shaky sentiment and changing perceptions on the health of the macro-economy,” said Barclays Capital analyst Sudakshina Unnikrishnan.

Oil: World oil prices tumbled as traders took their cue from sliding global stock markets, a stronger dollar and mounting concerns about a potential sovereign debt default in Europe.

“The price of oil fell... as traders continued to flee the euro and buy up the US dollar,” said ODL Securities analyst Marius Paun.

“Given the inverse relationship between the dollar and oil, this added some downside pressure but the big story remains the health of the Greek economy.

“Concerns over sovereign debt have pushed global equity markets lower, which in turn has dented investor confidence in terms of future demand,” Paun said.

Prices were also dampened on Friday in the wake of weaker-than-expected jobs data in the United States, which is the world’s biggest energy consuming nation.

A much-awaited US jobs report gave a mixed picture on the troubled labour sector that is key to sustainable economic recovery in the world’s biggest energy consuming nation.

US employers cut 20,000 jobs in January, the Labour Department reported, surprising most analysts, who had forecast a gain of 15,000.

The market had nosedived by nearly four dollars on Thursday, mirroring plunging global stock markets, as the dollar strengthened after a surprise rise in US initial weekly jobless and a deepening debt crisis in Europe.

Stocks tumbled further on Friday and the euro hit a near nine-month dollar low as investors ran for cover on fears that soaring European state debt could damage a fragile economic recovery.

Investors are nervous about Greece’s plans to rein in its public deficit which has pushed the eurozone into a crisis about the impact of a potential sovereign debt default.

The euro struck a near nine-month low at 1.3595 dollars on Friday as risk-averse investors moved into the safe-haven greenback.

A stronger US unit makes dollar-priced crude oil more expensive for buyers using weaker currencies — which in turn tends to dent demand and in turn prices.

The market had begun the week on a positive note, gaining ground on the back of positive manufacturing data in the United States which reassured nervous investors.

The Institute of Supply Management said its manufacturing index, also known as the purchasing managers index, climbed to 58.4 percent in January, the best number since 2004 and well ahead of the 50 percent that indicates growth.

The market was also spurred higher by geopolitical jitters surrounding Nigeria’s key oil-producing region.

Anglo-Dutch oil group Shell on Monday said it was forced to cut output after a key supply pipeline was sabotaged hours after militants announced the end of a ceasefire in Nigeria.

Nigeria’s main rebel group, the Movement for the Emancipation of the Niger Delta (MEND), vowed Tuesday to carry out fresh attacks on oil facilities “in the weeks to come” in the key Niger Delta region.

However, prices began sinking on Wednesday as the market reacted to a surprise jump in oil inventories in the United States.

By late Friday, New York’s main futures contract, light sweet crude for delivery in March, sank to 72.80 dollars a barrel from 74.30 dollars a week earlier.

London’s Brent North Sea crude for March fell to 71.44 dollars from 72.84 dollars.

Precious metals: The dollar “put downside pressure on gold given the inverse relationship it has with the currency”, ODL Securities analysts said in a research note.

By Friday on the London Bullion Market, gold fell to 1,058 dollars an ounce from 1,078.50 dollars the previous week.

Silver dropped to 15.17 dollars an ounce from 16.29 dollars.

On the London Platinum and Palladium Market, platinum slid to 1,475 dollars an ounce from 1,512 dollars.

Palladium slipped to 395 dollars an ounce from 419 dollars.

Base metals: Base metals prices “were thrashed again, as a surging dollar and weak US equity prices continue to weigh”, said MF Global analyst Edward Meir.

“However, it is the lingering concern about how deeply and quickly China will move on tightening credit that has generated the most angst,” he said.

By Friday on the London Metal Exchange, copper for delivery in three months dropped to 6,335 dollars a tonne from 6,820 dollars the previous week.

Three-month aluminium fell to 1,992 dollars a tonne from 2,100 dollars.

Three-month lead slipped to 1,968 dollars a tonne from 2,072 dollars.

Three-month tin retreated to 15,650 dollars a tonne from 16,910 dollars.

Three-month zinc declined to 2,003 dollars a tonne from 2,135 dollars.

Three-month nickel reclined to 17,410 dollars a tonne from 18,700 dollars.

Sugar: Sugar prices ended the week lower after reaching a 30-year high of 30.40 US cents a pound on Tuesday.

Sugar futures have been hitting multi-year highs in recent weeks on tight supplies amid downgrades to production in India.

By Friday on the New York Board of Trade (NYBOT), the price of unrefined sugar for March fell to 27.31 US cents a pound from 29.70 cents the previous week.

On LIFFE, London’s futures exchange, the price of a tonne of white sugar for delivery in March dropped to 736.40 pounds from 739.80 pounds.

Cocoa: Prices retreated further after striking a 33-year peak last month in London trade on worries about lower output from top producer Ivory Coast.

By Friday on LIFFE, the price of cocoa for delivery in March slipped to 2,240 pounds a tonne from 2,257 pounds the previous week.

On the NYBOT, the March cocoa contract retreated to 3,064 dollars a tonne from 3,242 dollars.

Coffee: Coffee prices dipped.

By Friday on LIFFE, Robusta for delivery in March edged down to 1,331 dollars a tonne from 1,334 dollars the previous week.

On the NYBOT, Arabica for March fell to 131.55 US cents a pound from 133.50 cents.

Grains and soya: Grains and soya prices steadied after falling across the board one week earlier.

“Grains prices managed to escape unscathed amid choppy trade in the spate of selling that engulfed commodity markets,” said analysts at Barclays.

“With grains having already dropped 10-15 percent on the month, prices appear to lack the desire to test much lower in the near term,” they said.

AFP