Most commodity markets stabilised last week after a fortnight of choppy trade, but crude oil sank further after the IEA warned that high price levels could endanger global economic growth. "After tumultuous price moves through the first two weeks of May, commodity prices have stabilised and in certain cases posted a rebound but the pace of the recovery has been mixed," said Barclays Capital analyst Sudakshina Unnikrishnan.
OIL: Crude futures fell after the International Energy Agency called for increased oil output to tackle the problem of high prices. The IEA said that despite a recent 10-percent drop, oil prices remained high because of strong demand and geopolitical uncertainty - a reference to unrest in North Africa and the Middle East.
Higher crude prices were "affecting the economic recovery by widening global imbalances, reducing household and business income, and placing upward pressure on inflation and interest rates," according to the IEA, which is the energy monitoring and strategy arm of developed economies. New York oil prices had surged above $100 a barrel on Wednesday, lifted by a weak dollar and an unexpected stabilisation in US crude stockpiles.
Prices rallied after the US government's Department of Energy announced that American crude stockpiles had failed to rise as expected in the week to May 13. Traders were still monitoring the political situation in the Middle East and North Africa, where uprisings have already toppled the leaders of Tunisia and Egypt and unrest has spread to other parts of the oil-producing region.
"Continuing unrest in the Middle East and North Africa region is providing support for oil and we expect prices to be hovering around the $100 level in the future," said Victor Shum, a Singapore-based analyst at Purvin and Gertz international energy consultancy.
By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in July had fallen to $110.92 a barrel from $112.85 for the June contract the previous week.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for June stood at $97.41 a barrel compared with $98.81.
PRECIOUS METALS: Gold, silver and platinum drifted lower but palladium won ground. "The precious metals mirrored the mixed mood, taking direction from currencies," noted Fast Markets analyst James Moore. Gold, fresh from striking record highs at the start of this month, will enjoy buoyant demand this year, particularly from China and India, the World Gold Council said in a report on Thursday.
"The resilience of gold during recent volatility in the commodities market exemplifies the strength of the global gold market and its unique demand drivers," said Marcus Grubb, Managing Director of Investment at the WGC.
"High levels of investment demand across the world, strong demand in India and China, the continued strength of the technology sector together with central bank purchasing demonstrates gold's diverse demand drivers. "We anticipate continued strong demand during the rest of 2011," Grubb said.
Gold struck a record $1,577.57 per ounce on May 2, as the safe-haven precious metal was lifted by a weak dollar, low US interest rates and concerns over high inflation. However, the metal has since tailed off slightly, amid a wider commodities sell-off. By late Friday on the London Bullion Market, gold fell to $1,491 an ounce from $1,506 the previous week. Silver dipped to $34.80 an ounce from $36.20. On the London Platinum and Palladium Market, platinum eased to $1,767 an ounce from $1,774. Palladium edged upwards to $734 an ounce from $718.
BASE METALS: Industrial metals traded mixed amid jitters over the dollar, the eurozone debt crisis and the faltering global economy. "Fears of further dollar strength, the debt crisis in the eurozone and slowing global growth momentum, as central banks tighten monetary policy to curb rising inflation, should keep the rallies in check," said analyst Robin Bhar at Credit Agricole CIB. By late Friday on the London Metal Exchange (LME), copper for delivery in three months rallied to $9,040 a tonne from $8,825 the previous week.
--- Three-month aluminium dipped to $2,526.75 a tonne from $2,600.
--- Three-month lead rose to $2,486 a tonne from $2,325.
--- Three-month tin slipped to $28,175 a tonne from $29,100.
--- Three-month zinc rose to $2,169 a tonne from $2,168.
--- Three-month nickel decreased to $23,485 a tonne from $24,600.
COCOA: Prices recoiled as top producer Ivory Coast resumed normal exports. "Prices are subject to downward pressure in the very short term ... as the civil unrest in Ivory Coast has calmed down and exports have resumed," said Macquarie analyst Kona Haque.
"2010/11 will be the first season in many to have enjoyed a large surplus, thanks to favourable weather in West Africa." By Friday on Liffe, London's futures exchange, cocoa for delivery in July dipped to £1,835 a tonne from £1,881 the previous week. In New York on the NYBOT-ICE, cocoa for July decreased to $2,936 a tonne from $3,042.
COFFEE: The market diverged in muted trade.
By Friday on NYBOT-ICE, Arabica for July slid to 264.80 US cents a pound from 275.50 cents the previous week. On Liffe, Robusta for delivery in July firmed to $2,565 a tonne compared with $2,510.
SUGAR: Sugar futures extended last week's slender gains. By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in July rose to 22.15 US cents a pound from 21.83 cents the previous week. On Liffe, the price of a tonne of white sugar for August increased to £620.70 from £609.
GRAINS AND SOYA: Prices staged an impressive rally. "Grains have rallied on inclement weather conditions that have spurred supply concerns, and have been the strongest performing commodities over the week," added Sudakshina Unnikrishnan at Barclays Capital.
By Friday on the Chicago Board of Trade, maize for delivery in July jumped to $7.56 a bushel from $6.82. July-dated soyabean meal - used in animal feed - rose to $13.85 a bushel from $13.29 a week earlier. Wheat for July leapt to $8.12 from $7.27.
RUBBER: Malaysian rubber prices rose on the back of tight supplies amid the wet season in major producer countries in Asia. The Malaysian Rubber Board's benchmark SMR20 rose to 455.40 US cents per kilo from 442.85 cents last week.
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