LONDON: The commodity markets were roiled this week as severe disruption to global air travel impacted supply and demand for raw materials such as oil and metals, analysts said. A volcanic eruption in Iceland spewed ash across Europe, forcing airplanes from the skies for safety reasons, with the industry badly hit and only getting back on its feet by Friday.
OIL: Oil prices ended the week in negative territory at the end of a volatile week marked by the unprecedented closure of European airspace and data showing sagging demand in key energy consumer the United States. Prices slumped almost two dollars on Monday amid continued concerns over fraud charges against Wall Street icon Goldman Sachs and the closure of European airports due to volcanic ash from an eruption in Iceland.
The market bounced back on Tuesday, rising dramatically on the back of optimism about the state of the economy and the prospect of transatlantic air travel resuming. Traders reacted to a pickup in jet fuel demand as planes increasingly took to the skies while stellar Goldman Sachs first-quarter earnings also boosted the market given the company’s positive outlook on the economy.
News that US crude reserves increased 1.9 million barrels in the week ending April 16, against market expectations for a drop of 200,000 barrels, sparked fresh concerns about underlying demand in the world’s biggest energy user.
“It does put some doubt into the fact that the market won’t move back into balance,” Ben Westmore, minerals and energy economist for the National Australia Bank in Melbourne, told AFP. “It’s arguable whether (oil above 80 dollars) is really justified given the very weak fundamentals.”
Demand in the United States is closely monitored because it is the world’s biggest economy and its biggest energy consumer but the economy is struggling to recover from its worst downturn since the 1930s. By late Friday on the New York Mercantile Exchange, Texas light sweet crude for delivery in June eased to 83.96 dollars from 84.08 dollars last week.
On London’s Intercontinental Exchange, Brent North Sea crude for June delivery slipped to 86.22 dollars compared with 86.53 dollars for the May-expired contract a week earlier.
PRECIOUS METALS: Palladium prices hit the highest level in more than two years. “Palladium prices set fresh 25-month highs as investment hits new record and China’s imports remain robust,” Barclays Capital analyst Suki Cooper said.
Gold meanwhile failed to hold on to gains made at the start of the week when the dollar had slid in reaction to the Goldman Sachs fraud charges. By late Friday on the London Bullion Market, gold dropped to 1,139.50 dollars an ounce from 1,151.50 dollars the previous week. Silver slid to 17.89 dollars an ounce from 18.34 dollars.
On the London Platinum and Palladium Market, platinum rose to 1,725 dollars an ounce from 1,708 dollars. Palladium jumped to 555 dollars an ounce from 532 dollars.
BASE METALS: Base metals prices fell a week after striking their highest levels for more than one year. “Dollar strength should deter any meaningful rallies in commodities from setting in over the short-term and instead, may increase the odds for a rather sharp break to the downside,” said Ed Meir, analyst at trading firm MF Global.
“With respect to metals, concern about the sustainability of China’s growth will also dog the complex given that the authorities have yet to play their trump card, which is raising general interest rates.”
By Friday on the London Metal Exchange, copper for delivery in three months fell to 7,740 dollars a ton from 7,885 dollars a week earlier.
Three-month aluminium dropped to 2,312 dollars a ton from 2,474 dollars. Three-month lead slid to 2,300 dollars a ton from 2,320 dollars. Three-month tin dipped to 18,990 dollars a ton from 19,150 dollars.
Three-month zinc retreated to 2,407 dollars a ton from 2,472 dollars. Three-month nickel declined to 26,930 dollars a ton from 27,000 dollars.
GRAINS AND SOYA: Soya prices rose while maize fell as investors tracked strong demand from China and US weather conditions. “Soybean prices are driven by demand. Just over the past week the US Department of Agriculture announced three times new purchases of soybeans by China,” noted Bill Nelson, an analyst for Doane Advisory Services.
“They were special announcements because the orders were superior to 100,000 tons. Evidence of strong demand for soybeans is exceeding previous expectations.”
Nelson added that maize prices dropped “as weather in the US has been excellent and we had strong plantings.”
By Friday on the Chicago Board of Trade, maize for delivery in July dropped to 3.68 dollars a bushel from 3.74 dollars the previous week.
July-dated soyabean meal — used in animal feed — climbed to 10.14 dollars from 9.99 dollars. Wheat for July rose to 5.09 dollars a bushel from 5.02 dollars.
COCOA: Cocoa prices advanced. By Friday on LIFFE, the price of cocoa for delivery in May rose to 2,336 pounds a ton from 2,131 pounds the previous week. On the NYBOT, the July cocoa contract stood at 3,186 dollars a ton compared with 2,912 dollars for the May-expired contract.
COFFEE: Coffee prices fell for a second week running. By Friday on LIFFE, Robusta for delivery in July dropped to 1,325 dollars a ton from 1,385 dollars the previous week. On the NYBOT, Arabica for July dipped to 131.60 US cents a pound from 132.10 cents.
SUGAR: Sugar prices retreated. By Friday on the New York Board of Trade (NYBOT), the price of unrefined sugar for delivery in July fell to 16.17 US cents a pound compared with 17.20 cents the previous week.
On LIFFE, London’s futures exchange, the price of a ton of white sugar for August dropped to 488.50 from 503.70 pounds for the May-expired contract.
RUBBER: Malaysian rubber prices nudged higher on rising concerns over tight supplies globally and a decline in production in Thailand. The Malaysian Rubber Board’s benchmark SMR20 edged up to 334.45 US cents a kilo from 334.35 cents last week.
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