Oil prices ended the week on a bearish note, falling more than 16 dollars in a week, on worries over economic growth and slowing demand. New York's main oil contract, light sweet crude for August delivery, slipped 41 cents to close at 128.88 dollars per barrel. From Tuesday through Thursday, New York crude had plunged more than 15 dollars.
In London, Brent North Sea oil for September delivery dropped 88 cents to settle at 130.19 dollars. "Market participants have become increasingly anxious about the (US) domestic economy at the same time that the conflict between the West and Iran over the latter's nuclear program may be on the wane," said Mike Fitzpatrick, an analyst at MF Global.
Investors abandoned oil in droves as the impact of the economic slowdown - both current and future - suddenly loomed high on traders' radar screens. Prices have plummeted since striking record highs above 147 dollars per barrel exactly a week ago. Traders worried that the slowing US economy would translate into lower demand from the world's biggest energy consumer.
"The recent huge pull back from new record highs above 147 dollars a barrel has come as the economic mess in the US continues, which has hurt current and future forecasted demand for oil," said Sucden analyst Michael Davies.
"At the same time there are growing signs that the fallout in the US is impacting the rest of the world, with economic data in Europe, the UK, and Japan worrying and there are even signs of slower growth in India and China, the key demand growth drivers." MF Global's Fitzpatrick predicted no rebound any time soon.
"The rout should continue into next week, unless some unusually optimistic economic statistic or corporate report appears," he said. Oil traders were focused on Geneva, where the European Union's foreign policy chief, Javier Solana, was to hold talks Saturday with Iran's nuclear negotiator, Saeed Jalili, on Iran's contested nuclear program.
The United States and other major powers have been locked in a long-running standoff with Iran over its nuclear drive, which they suspect is aimed at making weapons. Iran has repeatedly rejected demands to suspend uranium enrichment, insisting that its activities are exclusively aimed at energy production.
The Islamic republic is the world's fourth-biggest producer of crude oil, and tensions over its nuclear effort have helped push prices to record highs recently. Washington's decision this week to send Under Secretary of State William Burns to the talks marked a major policy shift by Washington, which has not had diplomatic relations with Iran since 1980.
Iran had said that the talks are aimed at finding "a framework" for future talks by the negotiating parties. "(Market) participants will be closely watching news releases over the weekend to see what color smoke comes from the meetings in Geneva. While a major breakthrough is not expected, we re-emphasize that direct US participation alone is," Fitzpatrick said.
US government data showed that oil inventories climbed by 3.0 million barrels in the week ending July 11, confounding market expectations for a drop of 2.2 million barrels. Just one week ago, London's Brent oil jumped to a record high 147.50 dollars per barrel and New York crude struck a life-time peak of 147.27 on the back of the weak dollar and tensions about key producers Iran and Nigeria.
Developments in the oil-rich Middle East continue to be closely watched after an apparent sudden shift in US diplomatic policy toward Iran announced late Tuesday. The United States said it was sending Under Secretary of State William Burns to talks on Saturday between Iran's nuclear negotiator, Saeed Jalili, and the European Union's foreign policy chief, Javier Solana.
The US and other major powers have been locked in a long-running standoff with Iran over its nuclear drive, which they suspect is aimed at making weapons. Iran insists its activities are aimed at energy production. By Friday, Brent North Sea crude for September delivery dived to 132.30 dollars, sharply down from 144.15 dollars a week earlier. New York's main oil futures contract, light sweet crude for August plummeted to 131.15 dollars from 146.55 dollars.
PRECIOUS METALS: Precious metals drew some strength from ongoing economic uncertainty stemming from the troubled US banking sector and the weak US dollar.
Gold, seen as a haven in times of economic troubles, reached 988.02 dollars an ounce, the highest level since March. The euro hit a record high of 1.6038 dollars on Tuesday on scepticism that a US government rescue of mortgage finance giants Fannie Mae and Freddie Mac would contain worries about the US financial sector, analysts said.
A weaker greenback tends to encourage demand for dollar-priced goods because they are cheaper for buyers with stronger currencies. "We believe that in the near term gold will be driven by risk aversion fears and, following the weekend moves to reassure financial markets about the future of Freddie and Fannie there may be some respite to these fears," said analyst James Moore at TheBullionDesk.com.
"But this may be only short-lived. Investors have become much more worried about systemic risk and, once worried, investors will remain concerned until there is clear evidence that the situation is getting better."
The price of white metal platinum meanwhile fell on hopes of an improving supply situation in key producer South Africa. On the London Bullion Market, gold eased to 959.75 dollars per ounce at Friday's late fixing from 962.75 dollars a week earlier. Silver rose to 18.55 dollars per ounce from 18.38 dollars. On the London Platinum and Palladium Market, platinum fell to 1,849 dollars per ounce at the late fixing on Friday from 2,030 dollars a week earlier. Palladium slipped to 419 dollars per ounce from 454 dollars.
BASE METALS: The base metals complex mainly fell on worries that slower US growth would sap demand. "We remain uninspired by the near term outlook for copper and aluminium as slowing (economic) growth is slowing demand growth for both metals," said UBS analyst John Reade. Aluminium had hit a historic 3,380 dollars per tonne the previous week after Chinese moves to cut production.
By Friday, copper for delivery in three months fell to 8,078 dollars per tonne on the London Metal Exchange from 8,365 dollars a week earlier. Three-month aluminium sagged to 3,040 dollars per tonne from 3,380 dollars. Three-month lead dipped to 1,965 dollars per tonne from 2,025 dollars. Three-month zinc slid to 1,806 dollars per tonne from 2,050 dollars. Three-month tin rose to 23,400 dollars per tonne from 23,201 dollars. Three-month nickel receded to 20,300 dollars per tonne from 21,900 dollars.
COFFEE: Coffee prices dipped after the sharp drop in oil. "Oil prices set off another chain reaction in the commodity complex, including (Arabica) coffee which slumped below 140 US cents," said Sucden analyst Ralph Hawes. By Friday on Liffe, Robusta for September delivery fell to 2,373 dollars per tonne from 2,361 dollars a week earlier. On the NYBOT, Arabica for September delivery slid to 137.50 US cents per pound from 142.62 cents.
COCOA: Cocoa prices fell, mirroring most other raw materials. By Friday on Liffe, London's futures exchange, the price of cocoa for September delivery dropped to 1,446 pounds per tonne from 1,550 pounds a week earlier. On the New York Board of Trade (NYBOT), the September cocoa contract sank to 2,807 dollars per tonne from 2,926 dollars.
SUGAR: Sugar also headed lower. By Friday on Liffe, the price per tonne of white sugar for October delivery dipped to 359 pounds from 390.50 pounds the previous week. On NYBOT, the price of unrefined sugar for October delivery declined to 12.53 US cents per pound from 13.80 cents.
GRAINS AND SOYA: Grains and soya prices sank on the prospect of favourable growing conditions in key producers Australia and the United States, as well as tumbling oil prices.
Lower crude prices tend to weaken prices of maize and soya, which are used to produce ethanol, a cheaper alternative to gasoline or petrol. By Friday on the Chicago Board of Trade, maize for August delivery slid to 6.29 dollars per bushel from 6.91 dollars the previous week. August-dated soyabean meal - used in animal feed - sank to 15.15 dollars from 16.15 dollars. Wheat for August delivery was down at 8.10 dollars per bushel from 8.30 dollars.
RUBBER: Malaysian rubber prices declined in line with the lower cost of crude, which is used to make synthetic rubber. "Prices eased as oil prices declined," said one dealer. On Friday, the Malaysian Rubber Board's benchmark SMR20 fell to 316.05 US cents per kilogramme (2.2 pounds) from 322.40 US cents a week ago.
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