LONDON: Commodity prices diverged this week as markets focused on a deal to avert a US-led military attack on Syria and reacted to the US Federal Reserve's surprise decision on stimulus.
The United States and Russia had last weekend agreed a deal to dismantle Syria's chemical weapons, easing crude supply fears.
The week's other major market-moving event occurred Wednesday when the Federal Open Market Committee (FOMC) decided against scaling down its $85 billion a month bond-buying spree, known as quantitative easing (QE).
The FOMC said that although the economy appears to be holding up amid government spending cuts, it "decided to await more evidence that progress will be sustained" before deciding to scale down the stimulus package.
OIL: Crude futures retreated over the week following volatile trading triggered by easing Middle East supply concerns and the Federal Reserve's surprise action.
"The main focus has returned to the oil (supply and demand) fundamentals," said Myrto Sokou, senior research analyst at Sucden brokers.
Analysts said the return to production of Libyan oil fields and the easing of tensions in the Middle East after Syria agreed to a plan to put its chemical weapons arsenal under international control helped ease prices.
Protests by oil field and export terminal workers since July had crippled Libyan production.
Crude futures were weighed down also by Iran's new President Hassan Rowhani, who said the Islamic republic did not seek war with any country, although he insisted that Israel as an "occupier" that has brought instability to the Middle East.
Oil prices lost more than $1.50 Thursday following the comments out of major oil producer Iran and amid the events in fellow OPEC-member Libya.
They had however risen strongly on Wednesday and for part of Thursday after the Federal Reserve confounded market expectations with its decision to refrain from tapering its $85-billion-a-month bond-buying programme.
Both oil contracts had surged by more than $2.5 on Wednesday following the Fed decision the same day.
The news has buoyed oil demand hopes in the United States, which is the world's top crude consuming nation.
Oil futures last month hit multi-month highs on fears that the US would press ahead with a punitive military strike on Syria, in a move which could spark a wider conflict in the crude-rich Middle East.
Brent "oil prices have steadied around the $109 a barrel level, with investors taking a breather after a volatile week", noted Gary Hornby, analyst at energy consultants Inenco.
"The outlook for oil at the beginning of next week remains uncertain, with the German general elections on Sunday allied to data from China, the eurozone and the US all expected to give further direction to the global economy on Monday.
"In addition, the Syrian situation continues to rumble in the background," Hornby added.
By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in November stood at $109.05 a barrel compared with $111.90 for the expired October contract a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for October dropped to $105.59 a barrel from $107.58.
PRECIOUS METALS: Prices rallied following the Fed announcement.
Gold dropped below $1,300 an ounce for the first time since August 8 on Wednesday before the US central bank's policy decision.
Traditionally a hedge against inflation, gold had tumbled on growing speculation over Fed tapering. Many investors argue that QE fuels higher inflation.
However prices soon rebounded.
"Precious metals, especially gold and silver, have been among the main beneficiaries of the Fed's surprise decision not to taper its asset purchases just yet," said Julian Jessop, head of commodities research at Capital Economics consultants.
"However, the Fed is still likely to taper soon, so this reprieve may only last a few months."
By late Friday on the London Bullion Market, the price of gold rose to $1,349.25 an ounce from $1,318.50 a week earlier.
Silver climbed to $22.74 an ounce from $21.72. On the London Platinum and Palladium Market, platinum edged up to $1,447 an ounce from $1,441.
Palladium grew to $726 an ounce from $700.
BASE METALS: Base or industrial metals rebounded.
"Metal prices surged noticeably following the Fed's meeting," said analysts at Commerzbank.
But Jessop noted that "industrial metals are far more sensitive to the near-term prospects for economic activity than to the outlook for monetary policy, with developments in China typically more important than those in the US".
Meanwhile a strike that paralysed a Chilean copper mine for two weeks ended after workers struck a wage deal with management.
Chile is the world's largest producer of the metal, generating about a third of global supply.
The agreement, reached Wednesday, foresees a three percent salary increase, an $18,000 bonus per worker and a termination plan for those nearing retirement.
The El Salvador Mine belongs to state-owned Codelco and is located about 800 kilometers (500 miles) north of the capital Santiago.
Codelco is responsible for 11 percent of global copper production.
By Friday on the London Metal Exchange, copper for delivery in three months jumped to $7,346 a tonne from $7,055 a week earlier.
Three-month aluminium climbed to $1,827 a tonne from $1,791.50.
Three-month lead grew to $2,105 a tonne from $2,091.50
Three-month tin gained to $23,285 a tonne from $22,579.
Three-month nickel increased to $14,370 a tonne from $13,692.
Three-month zinc advanced to $1,900 a tonne from $1,868.
COCOA: Futures hit fresh one-year high points on tight supply expectations.
"More and more observers are expecting to see the global cocoa market in deficit for the second consecutive time in the 2013/14 season," analysts at Commerzbank said in a note to clients.
By Friday on LIFFE, London's futures exchange, cocoa for delivery in December edged up to £1,705 a tonne from £1,700 a week earlier.
On New York's NYBOT-ICE exchange, cocoa for December rose to $2,615 a tonne from $2,595 a week earlier.
COFFEE: Prices struck new multi-year lows on rising stockpiles.
"The already negative sentiment with respect to Arabica coffee prices was exacerbated... by the fact that stocks of unroasted coffee beans in the US climbed by 7.4 percent year-on-year in August their fifth consecutive increase and are now at their highest level since July 2009," said Commerzbank analysts.
By Friday on NYBOT-ICE, Arabica for delivery in December slid to 115.25 US cents a pound from 119.90 cents a week earlier.
On LIFFE, Robusta for November dropped to $1,680 a tonne from $1,756.
SUGAR: Futures traded mixed.
By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in March stood at 17.73 US cents a pound compared with 17.14 cents for the October contract a week earlier.
On LIFFE, the price of a tonne of white sugar for December fell to $486.50 from $492.90.
GRAINS AND SOYA: Maize and soya prices fell on solid supplies, while wheat futures grew on high demand, traders said.
By Friday on the Chicago Board of Trade, November-dated soyabean meal used in animal feed dropped to $13.14 a bushel from $13.81 a week earlier.
Maize for delivery in December slid to $4.52 a bushel from $4.59.
Wheat for December rose to $6.44 a bushel from $6.41.
RUBBER: Prices climbed after the Fed's move to maintain its monetary stimulus, traders said.
The Malaysian Rubber Board's benchmark SMR20 rose to 243.75 US cents a kilo from 238.50 cents the previous week.
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