LONDON - Brent oil prices tumbled this week to a four-year low on plentiful crude supplies and on demand fears arising from global economic uncertainty.
Many commodities were hit by grim economic data, particularly from Germany, and after the International Monetary Fund (IMF) warned the eurozone could tip into recession.
On the upside, the coffee market hit a two-year peak as a “devastating” drought in key producer Brazil slashes supplies, analysts said.
OIL: Brent prices dived to a four-year trough on Friday, extending this week’s sharp falls as worries intensified over the demand outlook.
Brent North Sea oil struck $88.11 a barrel, the lowest level since December 1, 2010.
New York’s light sweet crude hit $83.59 per barrel, last witnessed on July 3, 2012.
“The market is continuing its slide on the back of poor economic news in Europe and in particular Germany, and worries of significantly slowing growth,” said Andy Lipow of Lipow Oil Associates. Both contracts have now plunged by about a fifth since striking their 2014 peaks in June. “Growing oil supplies throughout the world outpacing a slowdown in energy demand continue to put downside pressure on crude prices,” added Capital Spreads dealer Jonathan Sudaria.
Crude futures tumbled as fresh evidence of economic weakness in the eurozone added to concerns over slowing global growth and abundant oil supplies. A fresh round of negative eurozone data published on Thursday showed a 5.8 percent slump in German exports in August, while leading think tanks also slashed their growth forecasts for Europe’s largest economy.
Added to the grim mood, European stock markets recoiled to one-year lows on Friday, as poor economic data and the IMF’s eurozone recession warning sent shockwaves reverberating across the region.
IMF chief Christine Lagarde warned there was a 35-40 percent chance of the eurozone slipping back into recession if action is not taken to prevent it.
The forecast came after the IMF had this week cut its estimates for global economic growth for this year and in 2015.
Sentiment was also hut by stubborn worries over the Ebola outbreak in West Africa.
Oil prices were also dampened by ample global supplies owing to increased US shale production, and a return to the market of Libyan oil after prolonged disruption due to civil unrest.
In the United States, a key report also showed rising crude inventories, signalling weakening demand in the world’s top oil consumer.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in November sank to $89.85 a barrel compared with $91.88 one week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for November recoiled to $85.68 per barrel, from $89.67 a week earlier. Gold shines:
PRECIOUS METALS: Gold gained more ground, boosted by its haven status and the faltering dollar. “Precious metals and platinum group metals received a boost from the weaker dollar and rising uncertainty in the stock markets together with falling bond yields,” said Saxo Bank analyst Ole Hansen.
The weaker greenback makes dollar-priced commodities cheaper for buyers using stronger currencies. In turn, that tends to boost demand and prices.
Gold is also widely regarded as a safe bet by investors in times of economic uncertainty.
By late Friday on the London Bullion Market, the price of gold had risen to $1,219 an ounce from $1,195 a week earlier.
Silver increased to $17.26 an ounce from $16.97.
On the London Platinum and Palladium Market, platinum gained to $1,256 an ounce from $1,249.
Palladium firmed to $784 an ounce from $763.
BASE METALS: Base or industrial metal prices rose but gains were capped by uncertainty over the world economic outlook.
“Overall the deteriorating outlook for global (economic) growth makes further advances for this sector difficult to come by at this stage,” noted Hansen.
By Friday on the London Metal Exchange, copper for delivery in three months gained to $6,631.50 a tonne from $6,625 a week earlier.
Three-month aluminium increased to $1,923.75 a tonne from $1,912.
Three-month lead decreased to $2,059.25 a tonne from $2,082.25.
Three-month tin sank to $19,961 a tonne from $20,415.
Three-month nickel rose to $16,462 a tonne from $16,352.
Three-month zinc increased to $2,313.75 a tonne from $2,256. Coffee surges on drought -
COFFEE: Arabica coffee prices soared to a 2012 peak amid a drought that has hit crops in top global producer Brazil.
“The outlook for Arabica remains bullish, with prices surging in response to the devastating drought in Brazil - the world’s largest Arabica producer - which has cut production ... and hindered cherry development for the next crop,” said Ecobank analysts.
Arabica coffee jumped to 225.50 US cents per pound, the highest level since January 2012. Robusta rallied to a seven-month peak at $2,200 per tonne.
“Worrying developments in Brazil where persistent drought has become a major worry to coffee growers,” added Hansen.
By Friday on ICE Futures US, Arabica for delivery in December rallied to 220.80 US cents a pound from 209.45 cents a week earlier.
On LIFFE, London’s futures exchange, Robusta for November rebounded to $2,186 a tonne from $2,065 a week earlier.
COCOA: Prices fell further on easing supply concerns, having struck 3.5-year peaks last month on worries that the Ebola outbreak could spread to cocoa-producing nations in West Africa. “The past two weeks have seen the cocoa price correct part of the 30-percent surge in price it has experienced since the beginning of the year,” said Commerzbank analysts. “The announcement of higher prices for cocoa farmers and favourable weather conditions had given rise to optimism regarding the upcoming crops in West Africa and driven concerns about the spread of Ebola into the background.”
Cocoa had spiked in late September on worries that Ebola could reach Ghana and Ivory Coast, which are the two biggest producers of the commodity used to make chocolate.
The pair account for 60 percent of the world’s cocoa, while West Africa produces almost three quarters of global cocoa output.
By Friday on LIFFE, cocoa for delivery in December rose to £2,029 a tonne from £2,009 a week earlier.
On the ICE Futures US exchange, cocoa for December gained to $3,128 a tonne from $3,101 a week earlier.
SUGAR: The sugar market rebounded from recent falls on concerns over the impact of Brazil’s drought. “Bumper global stocks and expectations of a fifth consecutive global surplus in 2014/15 have driven price weakness for the past six months,” said Ecobank analysts.
“But these have given way to concerns over the impact of drought on Brazil’s sugar crop, which will cut the country’s sugar exports to their lowest level in six years. “However, any rally is likely to be short-lived, as another global surplus is expected this season.” By Friday on LIFFE, the price of a tonne of white sugar for delivery in December traded at $425.10 compared with $422.80 a week earlier. On ICE Futures US, the price of unrefined sugar for March rose to 16.63 US cents a pound from 16.21 US cents a week earlier.
RUBBER: Kuala Lumpur prices rose in subdued trading conditions. The Malaysian Rubber Board’s benchmark SMR20 stood at 142.50 US cents per kilo on Friday, up from 141.85 US cents the previous week.