Global commodity prices diverged this week as traders bet on a rosier economic outlook for the US amid mixed signals surrounding Chinese growth.
OIL: New York crude oil on Friday traded above Brent prices for the first time since August 2010, driven by a brighter US economic outlook and falling American crude stockpiles, analysts said.
New York’s main contract, West Texas Intermediate (WTI) was trading above $109 a barrel when it passed Brent in London afternoon deals on Friday.
New York crude was also trading at 16-month highs.
“Better-than-expected US economic data are providing the WTI price with upward momentum and so is the sharp reduction of US crude oil stocks in past weeks,” said Commerzbank analyst Carsten Fritsch.
The big jump in New York crude accompanied similar gains for share prices on Wall Street after a sharper-than-expected drop in US jobless claims and an unexpected spike in regional manufacturing activity.
Brent oil prices have historically traded below WTI crude but over the past three years have stayed above the US contract, largely owing to high US stockpiles according to analysts.
In October 2011, Brent traded almost $28 above WTI.
“The WTI has been reconnected to the world oil market through a change of pipeline logistics and increasing refinery demand,” said Andy Lipow of Lipow Oil Associates.
“The WTI was undervalued because there was a logistic bottleneck that prevented it from getting to the Gold Coast refining sectors, which meant that the alternative to pipeline was rail, which is far more expensive.”
Markets have been supported also by this week’s assurances from Federal Reserve chief Ben Bernanke that the bank’s $85bn-a-month bond-buying scheme would be kept in place as long as the world’s biggest economy needed it.
The official crude inventories report by the US Department of Energy on Wednesday, meanwhile, showed supplies in the US fell by 6.9mn barrels in the week to July 12.
The drop, which comes during the summer driving season when Americans take to the roads for their holidays, beat the 2.2mn barrels estimated by analysts.
Analysts said oil prices would remain supported by signs of stronger demand in the US, the world’s top crude consumer, as well as fears of a disruption in Middle East supply caused by Egypt’s political turmoil.
Oil prices have risen this week, also despite weak economic data out of China, the world’s biggest consumer of energy.
China reported that economic growth slowed to a 7.5% pace in the April-June quarter, down from 7.7% in the previous three months.
The slower growth rate came in as expected, which analysts said might explain the lack of impact on the market.
By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in September stood at $108.93 a barrel compared with $108.80 a week earlier for the expired August contract.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for August jumped to $108.67 a barrel from $105.65 a week earlier.
PRECIOUS METALS: Prices mostly rose.
By late Friday on the London Bullion Market, the price of gold climbed to $1,295.75 an ounce from $1,279.75 a week earlier.
Silver fell to $19.42 an ounce from $19.66.
On the London Platinum and Palladium Market, platinum gained to $1,422 an ounce from $1,403.
Palladium increased to $743 an ounce from $716.
BASE METALS: Base or industrial metal prices mainly decreased.
“The base metals market remains largely range bound with light volumes, amidst the summer vacation season,” said George Adcock, senior metals analyst at brokers Marex Spectron.
By Friday on the London Metal Exchange, copper for delivery in three months fell to $6,941 a tonne from $6,979.50 a week earlier.
Three-month aluminium dropped to $1,818 a tonne from $1,845.75.
Three-month lead declined to $2,047.75 a tonne from $2,076.50.
Three-month tin grew to $19,624 a tonne from $19,540.
Three-month nickel increased to $14,070 a tonne from $13,638.
Three-month zinc decreased to $1,865 a tonne from $1,905.
COCOA: Prices hit eight-month highs.
“Global cocoa demand appears to be recovering further,” noted analysts at Commerzbank.
“Furthermore, Ivory Coast, the world’s largest cocoa producer, expects the cocoa crop in crop year 2013/14 to decline by more than 100 thousand tonnes compared to the present crop year, to 1.4mn tonnes, which would also suggest a supply deficit in the coming crop year,” they added in a note to clients.
By Friday on Liffe, London’s futures exchange, cocoa for delivery in September rose to £1,619 a tonne – the highest level since December — from £1,558 a week earlier.
On New York’s Nybot-Ice exchange, cocoa for September climbed to $2,368 a tonne from $2,253.
COFFEE: Prices extended recent gains on tight supply concerns.
“Fears of frost damage have caused the Arabica coffee price to climb to a five-week high of 129 US cents per pound,” said Commerzbank analysts. “According to the weather forecasts, temperatures in the Brazilian coffee plantations could drop to zero in the coming week, thus resulting in crop shortfalls.”
By Friday on Nybot-Ice, Arabica for delivery in September grew to 129.15¢ a pound from 124.25¢ a week earlier.
On Liffe, Robusta for September increased to $1,991 a tonne from $1,896.
SUGAR: Futures struck fresh three-year low points on the prospect of plentiful supplies in Brazil, before rebounding late in the week.
London sugar prices hit $458.40, the lowest point since June 2010, while New York reach a similar trough at 15.93 cents.
By Friday on Nybot-Ice, the price of unrefined sugar for delivery in October grew to 16.28¢ a pound from 16.16¢ a week earlier.
On Liffe, the price of a tonne of white sugar for October gained to $465.30 from $462.20.
RUBBER: Prices climbed on expectations of tight supply in Thailand and other major rubber producers.
The Malaysian Rubber Board’s benchmark SMR20 rose to 224.40¢ a kilo from 221.10¢ the previous week.
Reported by: Caye Global News, Gulf Times
Oil, Gas and Petrochemicals by Dr. Theodore, now available on these stores:
Oil – Gas Exploration & Drilling: