LONDON - Star performer oil hit an eight-month peak this week on the back of simmering tensions in key crude producer Iran, but other commodities enjoyed mixed fortunes as traders tracked the Greek debt crisis.
“This week, sentiment has once again shifted toward Europe’s sovereign debt issues — particularly concerning the developments in Greece — and Middle East geopolitical risks,” said Barclays Capital analyst Sudakshina Unnikrishnan.
“Crude oil markets broke away from their range-bound trading and gained steady ground over the week supported by constructive fundamentals and escalating geopolitical tensions.” Eurozone leaders for several weeks have been negotiating a Greek rescue package of 130 billion euros in fresh loans and a writedown on privately-held government bonds worth 100 billion euros ($131 billion) to avoid a default on debt coming due on March 20.
Greek lawmakers approved harsh austerity measures last weekend, but eurozone finance ministers ditched a meeting on Wednesday after Athens failed to meet other conditions set by lenders. The spotlight now moves to a key Brussels gathering fo finance ministers next Monday.
OIL: Brent oil prices rocketed to an eight-month high early on Friday, driven by concerns over Iran and hopes that the Greek debt crisis can be resolved, traders said. Brent North Sea crude for April delivery struck $120.70 per barrel, its highest point since June 14.
The market has surged after Iran warned that it may suspend crude exports to six European Union countries amid escalating tensions over Tehran’s nuclear program.
Iran said Wednesday that it was considering cutting oil sales to six EU countries but would not do so “at the moment,” while unperturbed European officials said they were looking for other suppliers anyway.
State broadcaster IRIB reported on its website that the ambassadors of France, Greece, Italy, the Netherlands, Portugal and Spain were called to the foreign ministry in Tehran and warned that “Iran will revise its oil sale to these countries.”
The warning was in retaliation of a European Union ban on Iranian oil imports that is being phased in as existing contracts expire up to July 1. The EU, the United States and their allies suspect Tehran is developing nuclear weapons; Tehran insists its program is purely for peaceful purposes.
The European Commission said that, even if Iran did cut its sales to the European Union, it would make little difference as EU buyers were already switching suppliers. Prices also won support after the US Department of Energy reported American crude stockpiles sank by 200,000 barrels in the week ending February 10, indicating strengthening demand in the world’s biggest crude consumer.
“Greater risk appetite in the light of hopes of financial assistance for Greece, coupled with the Iran crisis, have caused Brent to climb to an eight-month high of over $120,” added Commerzbank analyst Carsten Fritsch.
Sentiment was also lifted by news that US unemployment benefit claims fell to a four-year low last week, indicating a labour market recovery in the world’s biggest economy and largest oil consumer. The US Department of Labor on Thursday said applications for unemployment insurance payments dropped by 13,000 to 348,000 last week.
By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in April jumped to $119.32 a barrel from $116.93 the previous week for the March contract.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for March rallied to $102.83 from $98.04.
BASE METALS: Base or industrial metals fell across the board as traders fretted over Greece and weak fourth-quarter gross domestic product (GDP) data in the eurozone.
“The market has generally reacted negatively to the latest attempts to resolve the Greek debt position,” said Societe Generale analysts in a research note to clients.
“Also, the market has to absorb the (eurozone) data which confirmed the weak performance in the final quarter of last year.” The eurozone economy shrunk by 0.3 percent in the last three months of 2011, official figures showed on Wednesday in a clear sign the debt crisis is pushing the 17-nation bloc towards recession.
That was the first time the eurozone contracted since the second quarter of 2009.
Germany, Europe’s top economy, posted a contraction of 0.2 percent in the fourth quarter while its second-placed partner France surprised with growth of 0.2 percent, the figures showed.
Italy, the Netherlands and Belgium meanwhile entered recession after their economies shrank in the third and fourth quarters. Recession is officially defined as two consecutive quarters of economic contraction.
By late Friday on the London Metal Exchange, copper for delivery in three months fell to $8,293 a tonne from $8,500 the previous week.
Three-month aluminium decreased to $2,168 a tonne from $2,255. Three-month lead eased to $2,048 a tonne from $2,163.
Three-month tin slipped to $24,000 a tonne from $24,900.
Three-month zinc slid to $1,971 a tonne from $2,089.
Three-month nickel dipped to $19,670 a tonne from $20,871.
PRECIOUS METALS: Gold and silver traded within a narrow range while palladium and platinum finished the week on a flat note. “The gold market continues to swing back and forth with the broader market as rising concerns over the next Greek bailout weighed on sentiment,” said VTB Capital analyst Andrey Kryuchenkov.
Meanwhile, the World Gold Council (WGC) forecast that China is set to overtake India as the world’s largest gold buyer this year as demand for the metal for jewellery and as a safe-haven investment surges.
Global demand hit 4,067.1 tonnes in 2011 — edging up 0.4 percent year-on-year — worth an estimated $205.5 billion, the first time demand has surpassed $200 billion, the WGC said in its latest annual report.
India, the largest gold consumer and importer, saw a 7.0-percent decline in demand year-on-year to 933.4 tonnes last year, while demand from China jumped 20.0 percent to 769.8 tonnes in the same period.
“There was a major boost to the overall demand from China, a trend we see continuing in the new year,” said Marcus Grubb, WGC’s investment managing director.
“It is likely that China will emerge as the largest gold market in the world for the first time in 2012.”
By late Friday on the London Bullion Market, gold firmed to $1,723 an ounce from $1,711.50 the previous week.
Silver eased to $33.48 an ounce from $33.55. On the London Platinum and Palladium Market, platinum was unchanged at $1,638 an ounce from $1,638.
Palladium declined to $697 an ounce from $697.
COCOA: Prices rebounded as investors fretted over the prospect of poor supplies from West African supplies.
“The price has increased amid fears of a poorer interim harvest in West Africa,” added Fritsch at Commerzbank.
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in May rose to £1,508 a tonne from £1,433 a week earlier for the March contract.
In New York on the NYBOT-ICE, cocoa for May increased to $2,355 a tonne from $2,199 a week earlier for the March contract.
COFFEE: Coffee prices rose in London but sank to a 14-month low in New York as traders digested forecasts for a bumper crop in Brazil.
“It is clearly being influenced by expectations of a good harvest in Brazil,” said Fritsch.
By Friday on LIFFE, Robusta for delivery in May rose to $2,008 a tonne from $1,973 a week earlier for the March contract. On NYBOT-ICE, Arabica for May eased to 202.20 US cents a pound from 215.85 cents.
SUGAR: Sugar futures experienced a modest decline.
By Friday on LIFFE, the price of a tonne of white sugar for May decreased to $628 from $650.30 the previous week for the March contract. On NYBOT-ICE, the price of unrefined sugar for delivery in March dipped to 23.80 US cents a pound from 24.31 cents a week earlier.
RUBBER: Prices dipped as eurozone concerns trumped tight supplies. The Malaysian Rubber Board’s benchmark SMR20 fell to 370.45 US cents a kilo from 372.70 cents the previous week.