New York crude oil prices sank this week as data revealed a large jump in US energy stockpiles and top industry bodies forecast falling demand because of the global economic slowdown. However, prices recovered somewhat on Friday heading into a three-day holiday weekend with US financial markets closed for Presidents Day on Monday.
Meanwhile, the US Congress on Friday was expected to pass an unprecedented 789-billion-dollar package to rescue the recession-hit American economy. "The worsening economic outlook continues to provide a reality check for markets and policy makers," said Calyon analyst Mitul Kotecha. "Even the 789-billion-dollar stimulus plan in the US is unlikely to deliver quick results, implying more market and economic stress in the months ahead."
OIL: Crude prices tumbled in New York, again nearing the five-year low of 32.20 dollars reached on December 18, as ample US energy reserves weighed on the market. The price differential between New York crude and London Brent oil meanwhile hit a record, exceeding 11 dollars on Friday, which analysts also attributed to soaring US stockpiles.
The New York price "has been distorted by the building of inventories, particularly in Cushing," said David Moore, commodity strategist with the Commonwealth Bank of Australia. Cushing, Oklahoma is the delivery point for crude traded on the New York Mercantile Exchange (Nymex).
The worst global economic crisis since the Great Depression of the 1930s has hurt energy demand and pulled prices down from record highs of above 147 dollars for Brent and New York crude reached last July. "The current calamity is as real as real gets," said Mike Fitzpatrick of MF Global. "In some quarters it is even being characterised as a depression." Against the current economic backdrop, "30-dollar oil now seems realistic," he said.
It will take at least two years for crude prices to recover to 70-75 dollars a barrel, Falah al-Amiri, who heads Iraq's oil marketing body, said Thursday. Crude futures have fallen this week as government data showed surging crude stockpiles, reflecting weaker demand in the United States - the biggest energy-consuming nation.
The US Department of Energy said in a report on Wednesday that American crude stockpiles had soared by 4.7 million barrels in the week ending February 6. That beat market expectations of a 3.0-million-barrel gain. The International Energy Agency (IEA) on Wednesday again cut its forecast for global oil demand this year, but warned about a future supply crunch because of current low investment levels.
The energy watchdog for industrialised nations forecast that global oil demand would measure 84.7 million barrels per day (bpd) on average in 2009 - 570,000 bpd less than its last forecast made in January. At this level, demand would be 1.1 percent or 1.0 million bpd less than in 2008, when demand also fell compared with the year earlier.
The IEA, echoing warnings from industry insiders and members of Organisation of Petroleum Exporting Countries, also said that one of the effects of low prices would be a delay in investment in future capacity that will be needed once global growth picks up again.
Opec also trimmed its forecasts for global oil demand, forecasting that it would shrink by 0.67 percent in 2009 because of "economic depression" in industrialised countries. "World oil demand continues its steep decline from last year and is expected to follow this strong negative pattern at least for the first three quarters of the year," the cartel wrote in its February report.
By Friday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in March dived to 35.98 dollars a barrel from 39.54 dollars a week earlier. On London's InterContinental Exchange (ICE), Brent North Sea crude for April firmed to 45.58 dollars a barrel, from 45.23 dollars a barrel for the March contract which expired Thursday.
PRECIOUS METALS: Gold breached 930 dollars per ounce, drawing strength from its status as a safe-haven in uncertain times. "The financial and economic crisis ... is prompting investors to rush to gold at the moment," said Dresdner Kleinwort analyst Eugen Weinberg.
By Friday on the London Bullion Market on Friday, gold advanced to 933.50 dollars an ounce at the late fixing from 909.59 dollars a week earlier. Silver rose to 13.37 dollars an ounce from 12.89 dollars. On the London Platinum and Palladium Market, platinum gained to 1,055 dollars an ounce at the late fixing on Friday from 989 dollars a week earlier. Palladium gained to 213 dollars an ounce from 208 dollars.
BASE METALS: Base metals prices mostly fell as investor sentiment turned sour. "Negative sentiment on the global equity markets and disappointing economic data weighed on industrial metals," said VTB Capital analyst Andrey Kryuchenkov.
"The US Senate finally approved the economic stimulus deal proposed by the Obama administration, but market participants remained unimpressed with the 789-billion-dollar deal in government spending and tax reductions." By Friday, copper for delivery in three months eased to 3,449 dollars a tonne on the London Metal Exchange from 3,485 dollars the previous week.
-- Three-month aluminium dipped to 1,378 dollars a tonne from 1,460 dollars.
-- Three-month lead fell to 1,159 dollars a tonne from 1,167 dollars.
-- Three-month tin decreased to 10,900 dollars a tonne from 11,010 dollars.
-- Three-month zinc climbed to 1,163 dollars a tonne from 1,151 dollars.
-- Three-month nickel declined to 10,452 dollars a tonne from 11,538 dollars.
COCOA: Cocoa prices retreated on profit-taking, two weeks after hitting a 24-year high of 2,045 pounds a tonne on supply disruptions in key producer Ivory Coast. By Friday on Liffe, London's futures exchange, the price of cocoa for delivery in May dropped to 1,899 pounds a tonne from 1,956 pounds a week earlier. On the New York Board of Trade (NYBOT), the March cocoa contract sagged to 2,663 dollars a tonne from 2,788 dollars.
COFFEE: Coffee prices drifted lower. By Friday on Liffe, Robusta for delivery in May edged down to 1,601 dollars a tonne from 1,650 dollars a week earlier. On the NYBOT, Arabica for May declined to 114.50 US cents a pound from 118.45 US cents.
GRAINS AND SOYA: Maize and soya prices sank in line with most commodity markets. By Friday on the Chicago Board of Trade, maize for delivery in March fell to 3.66 dollars a bushel from 3.77 dollars the previous week. March-dated soyabean meal - used in animal feed - eased to 9.70 dollars from 10.01 dollars. Wheat for March dropped to 5.42 dollars a bushel from 5.57 dollars.
SUGAR: Sugar prices steadied in muted trading conditions. By Friday on Liffe, the price of a tonne of white sugar for delivery in May climbed to 391 pounds from 381.90 pounds a week earlier. On NYBOT, the price of unrefined sugar for March firmed to 13.22 US cents per pound from 13.17 cents.
RUBBER: The price of rubber fell due to lack of fresh demand, dealers said. On Friday, the Malaysian Rubber Board's benchmark SMR20 eased to 138.35 US cents per kilogram, compared with 139.40 cents a last week.
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