Oil and most metals prices rebounded this week as investors sought a safe haven owing to a weaker dollar, struggling stock markets and global supply tensions. "Thursday saw a big bounce across the commodity spectrum as the dollar weakened and oil experienced a massive rally," said UBS analyst John Reade.
OIL: Oil prices jumped back above 122 dollars per barrel on the back of simmering geopolitical tensions between the United States and Russia, a weak dollar and a large drop in US motor fuel reserves. New York crude oil hit to 122.04 dollars in Thursday trading, a level last seen in early August before slipping back Friday.
"Mounting geopolitical tension between the US and Russia continues to raise market concerns," said Barclays Capital analyst Michael Zenker. "Perhaps most importantly of all though, the supply of fundamental data continues to support the view of continued tightness in oil market fundamentals, underpinning prices," he added.
Russia, the world's biggest producer of crude oil after recently overtaking Saudi Arabia, had completed its pullback of troops in Georgia, Defence Minister Anatoly Serdyukov said on Friday. However the United States accused Russia of failing to abide by a ceasefire. Oil prices had got a boost Wednesday and Thursday after figures showed US gasoline (petrol) reserves slumped 6.2 million barrels last week, compared with market expectations for a drop of only 2.4 million barrels.
Gasoline stocks are closely watched at this time of year as American motorists are on the highways for their summer vacations, typically pushing up demand for motor fuel. Oil prices had closed up by more than one dollar on Tuesday after Opec member Venezuela said it would ask the cartel at its September meeting to cut production if downward price pressure continued.
Despite recent gains, world oil prices have tumbled sharply from record highs above 147 dollars a barrel set in July as weak economic growth dents global demand for energy. Before ending higher, oil prices had fallen close to 110 dollars on Tuesday as Tropical Storm Fay missed energy production facilities in the Gulf of Mexico.
Prices, which broke through the 100-dollar level at the start of 2008, remain well above year-ago levels. Traders said the market was now looking ahead to what position the Organization of the Petroleum Exporting Countries (Opec) would take at its regular September meeting. Opec, which is steered by Saudi Arabia, produces about 40 percent of the world's crude.
A leading British energy consultancy, CGES, said Monday that Opec might decide to cut output next month should the price of crude fall under 100 dollars. By Friday, New York's main oil futures contract, light sweet crude for delivery in October was at 119.48 dollars, up sharply from 112.35 dollars a week earlier. Brent North Sea crude for October climbed to 118.51 dollars from 111.12 dollars.
PRECIOUS METALS: Gold prices rebounded above 800 dollars an ounce. The gains "again prove gold's role as a hedge against inflation as well as periods of economic unrest and geopolitical tension," said Bullion Desk analyst James Moore. On the London Bullion Market, gold rose to 824 dollars per ounce at Friday's late fixing from 786.50 dollars a week earlier.
Silver increased to 13.62 dollars per ounce from 12.82 dollars. On the London Platinum and Palladium Market, platinum advanced to 1,427 dollars per ounce at the late fixing on Friday from 1,400 dollars. Palladium slipped to 288 dollars per ounce from 295 dollars on profit-taking.
BASE METALS: Base metals recovered in line with precious metals and oil. "The strength in oil and the weakness in the dollar gave the spark that was needed for all the base metals to undergo" a jump in prices, said Reade of UBS. By Friday, copper for delivery in three months rose to 7,710 dollars per tonne on the London Metal Exchange from 7,310 dollars a week earlier.
Three-month aluminium increased to 2,800 dollars per tonne from 2,769 dollars. Three-month lead advanced to 1,887 dollars per tonne from 1,689 dollars. Three-month zinc rallied to 1,830 dollars per tonne from 1,660 dollars. Three-month tin jumped to 21,400 dollars per tonne from 18,547 dollars. Three-month nickel raced up to 20,937 dollars per tonne from 18,501 dollars.
COFFEE: Coffee prices rebounded in London and New York. "Solid performance from New York was the driving force in the (London) market ... as funds were noted buyers," said Ralph Hawes, an analyst at the Sucden brokerage. By Friday on Liffe, London's futures exchange, Robusta for November delivery rallied to 2,303 dollars per tonne from 2,210 dollars a week earlier. On the New York Board of Trade (NYBOT), Arabica for December delivery rose to 143.15 US cents per pound from 134.45 cents.
COCOA: Cocoa prices advanced strongly. "Ivory Coast cocoa exporters have warned that a government crackdown on corruption in the cocoa sector has crippled the state marketing board and may disrupt operations in the forthcoming main crop season," noted the Public Ledger commodities review. By Friday on Liffe, the price of cocoa for December climbed to 1,572 pounds per tonne from 1,458 pounds a week earlier. On the NYBOT, the December cocoa contract jumped to 2,806 dollars per tonne from 2,651 dollars.
SUGAR: Sugar prices rose this week. "Sugar also rose strongly, (...) with the rise in crude oil prices providing strong support," said analysts at Barclays Capital. Sugar is used in the production of ethanol, a cheaper alternative to motor fuel that is refined from crude oil. By Friday on Liffe, the price per tonne of white sugar for October delivery improved to 401.20 pounds from 381.80 pounds the previous week. On NYBOT, the price of unrefined sugar for October delivery increased to 13.91 US cents per pound from 13.13 cents.
GRAINS AND SOYA: Grains and soya prices rose further as the market tracked weather developments in the US Midwest. By Friday on the Chicago Board of Trade, maize for December delivery was higher at 6.07 dollars per bushel from 5.50 dollars the previous week. November-dated soyabean meal - used in animal feed - rose to 13.31 dollars from 12.24 dollars. Wheat for December delivery firmed to 9.09 dollars per bushel from 8.49 dollars.
RUBBER: Malaysian rubber prices extended losses despite the gains in oil prices late in the week. On Friday, the Malaysian Rubber Board's benchmark SMR20 fell to 284.80 US cents per kilogramme (2.2 pounds) from 287.65 US cents a week ago.
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