Oil hit a six-month high above 60 dollars last week, boosted by a falling US currency, but later retreated on a worsening demand outlook which also pushed down base metals prices, analysts said.
OIL: New York crude reached 60.08 dollars a barrel Tuesday - the highest level since mid-November - on hopes of economic recovery and a weaker dollar that made dollar-priced crude cheaper for foreign buyers, dealers said. On Friday, they fell back towards 58 dollars as news of a deep recession for Europe further dampened hopes of a quick rebound in energy demand.
"Markets were a little lower after data from Europe disappointed," said Nimit Khamar, energy analyst at Sucden brokers in London. The 16 nation eurozone economy contracted a record 2.5 percent in the first quarter as Europe lurched deeper into recession while Germany suffered its biggest blow for 40 years. Accounting for a third of eurozone output, Germany contracted 3.8 percent in the first three months compared to the final quarter of 2008, when the economy shrank 2.2 percent, the statistics office said.
France, Germany's main partner and the second-biggest eurozone economy, meanwhile entered recession as output fell 1.2 percent after a 1.5 percent drop in the last quarter of 2008. The French finance minister said this meant the economy was set to shrink three percent this year. Figures out Friday in other European countries - Austria, Italy, Hungary and Norway - painted a similarly bleak picture.
On Thursday, the International Energy Agency forecast a drop in global oil demand, saying optimism about an economic recovery was not reviving appetite for energy. The IEA trimmed its forecast for 2009, which it estimated at 83.2 million barrels per day (bpd), three percent lower than last year and the sharpest annual fall since 1981. Last month, it had estimated 2009 demand at 83.4 million bpd.
The IEA is the oil monitoring and policy arm of the Paris-based Organisation for Economic Co-operation and Development. The weak demand outlook this week offset a surprise drop in crude inventories in the United States, the world's largest energy consumer. US crude stockpiles fell 4.7 million barrels last week, the US government's Energy Information Administration said Wednesday. Analysts had expected a rise of 1.3 million barrels.
Inventories of gasoline, or motor fuel, dropped 4.1 million barrels. The United States is gearing up for the start of its summer vacation period when Americans traditionally hit the roads in vast numbers. Meanwhile Opec, whose members together pump 40 percent of world crude, also cut its forecast for global oil demand this year - saying this week that it would contract by 1.57 million barrels per day or 1.83 percent in 2009.
In its previous monthly bulletin released in April, Opec had been pencilling in a contraction of 1.37 million bpd for 2009. By Friday, on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in June rose to 58.35 dollars a barrel from 57.60 dollars a week earlier. On London's InterContinental Exchange (ICE), Brent North Sea crude for July stood at 58.07 dollars compared to 57.28 dollars for the now-expired June contract a week earlier.
PRECIOUS METALS: Precious metals closed the week mixed. Gold "looks similar to the stock market in the way that it's overbought," said Chris Powell, head of commodities at ETX Capital. By late Friday on the London Bullion Market, gold rose to 929.50 dollars an ounce from 907 dollars a week earlier. Silver edged up to 13.92 dollars an ounce from 13.90 dollars.
On the London Platinum and Palladium Market, platinum fell to 1,109 dollars an ounce at the late fixing on Friday from 1,149 dollars. Palladium dropped to 224.50 dollars an ounce from 242 dollars.
BASE METALS: Base metals prices were low across the board. "A lot of good news (like renewed Chinese buying) has now been priced in," said analysts at Barclays Capital. By Friday on the London Metal Exchange, copper for delivery in three months dropped to 4,352 dollars a tonne from 4,763 dollars a week earlier.
-- Three-month aluminium slipped to 1,515 dollars a tonne from 1,564 dollars.
-- Three-month lead declined to 1,420 dollars a tonne from 1,484 dollars.
-- Three-month tin fell to 13,595 dollars a tonne from 14,214 dollars.
-- Three-month zinc decreased to 1,498 dollars a tonne from 1,557 dollars.
-- Three-month nickel slumped to 12,250 dollars a tonne from 13,303 dollars.
COCOA: Cocoa prices retreated on forecasts of falling demand.
By Friday on Liffe, London's futures exchange, the price of cocoa for delivery in July dropped to 1,607 pounds a tonne from 1,752 pounds a week earlier. On the New York Board of Trade (NYBOT), the July cocoa contract slipped to 2,335 dollars a tonne from 2,507 dollars.
COFFEE: Coffee prices rose on falling exports from Colombia. By Friday on Liffe, Robusta for delivery in July advanced to 1,500 dollars a tonne from 1,493 dollars a week earlier. On the NYBOT, Arabica for July gained to 127 US cents a pound from 125.20 cents.
GRAINS AND SOYA: Grains and soya prices rose as the US government reported a drop in stockpiles. By Friday on the Chicago Board of Trade, maize for delivery in July gained to 4.29 dollars a bushel from 4.21 dollars a week earlier. July-dated soyabean meal - used in animal feed - climbed to 11.41 dollars from 11.11 dollars. Wheat for July was unchanged at 5.91 dollars a bushel.
SUGAR: Sugar prices were mixed. By Friday on Liffe, the price of a tonne of white sugar for delivery in August slid to 435 pounds from 445.90 pounds a week earlier. On NYBOT, the price of unrefined sugar for July increased to 15.45 US cents a pound from 15.37 cents.
RUBBER: Malaysian rubber prices fell late in the week, hit by weaker demand owing to falling oil prices. Crude oil is used to make synthetic rubber. The Malaysian Rubber Board's benchmark SMR20 dropped to 160.75 US cents a kilo on Friday from 165.90 US cents a week earlier.
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