LONDON- Commodity prices slumped this week, with Brent oil crashing to 18-month lows and metals tumbling, as more dark clouds appeared over an already troubled global economy.
OIL: Brent crude oil dropped under $90 a barrel for the first time since December 2010 on weak demand expectations for crude caused by the eurozone debt crisis and weakening growth in the United States and China, analysts said.
Brent North Sea crude slid to $88.49 a barrel on Friday, while New York’s main light sweet crude contract fell to an eight-month low of $77.56 a barrel.
“Oil market sentiment has worsened significantly over the past week,” in part “by a hardening of attitudes over the likely duration and scale of euro area problems,” said Barclays Capital analyst Amrita Sen.
Meanwhile dimming hopes for stronger global economic growth and the United States’ persistently brimming stockpiles pushed crude oil prices sharply lower on Thursday, with both major benchmarks losing more than 3.7 percent.
Brent on Thursday also went under $90 for the first time in 18 months. “The slump in oil prices results from faltering global demand and growing fears of an escalation of the eurozone crisis,” said Andrew Kenningham, a senior economist at Capital Economics research group.
“As such, it is wishful thinking to imagine that cheap oil can itself generate a recovery.”
Demand expectations lost ground after data signalled more weak economic growth in the United States, China and Europe, and US Energy Department figures showed an unexpected expansion of stockpiles.
The falls were all about the poor signs for economic growth and oil consumption from data around the world, against a general rise in output especially in North America.
Muted new stimulus efforts and a cut in the US growth forecast by the Federal Reserve on Wednesday were followed Thursday by a dim reading on a closely watched China industry purchasing managers’ index (PMI) from HSBC bank, which fell to 48.1 in June from 48.4 in May on shrinking exports and weak domestic demand.
And in Europe the research firm Markit’s EU-wide PMI for June was at its lowest level for three years as business sentiment deteriorated in the crisis-hit region, a key survey showed Thursday. “Recession always poses the greatest downside risk for the oil price,” said James Williams of WTRG Economics.
On top of that was the surprise jump in US commercial oil reserves. Stocks unexpectedly climbed by 2.9 million barrels last week to their highest level for nearly 22 years.
By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in August plunged to $90.62 a barrel from $97.57 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for August stood at $79.39 a barrel compared with $83.92 for the expired July contract a week earlier.
PRECIOUS METALS: Prices slid, with silver hitting a six-month low at $26.62 an ounce.
“Precious metals remain in the doldrums,” Deutsche Bank analysts said in a note to clients.
“The deterioration of economic conditions in both the US and China is exacerbating the risk perceptions which have grown as the eurozone crisis continues to grab international headlines. “The conventional wisdom favours perceived low-risk sovereigns such as German bonds and US treasuries; therefore capital flows have moved from various equities, commodities and higher-risk bond markets to these safe havens,” they added.
By late Friday on the London Bullion Market, gold slid to $1,565.50 an ounce from $1,627.25 a week earlier. Silver dropped to $26.81 an ounce from $28.66.
On the London Platinum and Palladium Market, platinum decreased to $1,435 an ounce from $1,493.
Palladium fell to $608 an ounce from $632 an ounce.
BASE METALS: Base metals prices plunged to multi-month lows, with losses accelerating late in the week on poor Chinese manufacturing data.
“Weaker... data in China, Germany, the EU and the US, all weighed on sentiment,” said William Adams, an analyst at Fast Markets research group.
“With the US showing more signs of slowing, the outlook for the global economy has deteriorated as it looks more likely that all regions are now suffering including the likes of India and Brazil. As such, it is not surprising that the metals are under pressure,” he added.
Copper on Friday hit a six-month low at $7,219.50 a tonne, while aluminium struck a two-year trough at $1,854 a tonne.
By late Friday on the London Metal Exchange, copper for delivery in three months slumped to $7,339 a tonne from $7,516.50 a week earlier.
Three-month aluminium dropped to $1,878 a tonne from $1,937.
Three-month lead decreased to $1,820 a tonne from $1,933.75.
Three-month tin slid to $18,410 a tonne from $19,700.
Three-month nickel retreated to $16,350 a tonne from $16,750.
Three-month zinc fell to $1,813 a tonne from $1,907.25.
COFFEE: Coffee prices struck fresh two-year lows at 150.10 US cents a pound in New York on expectations of ample Brazilian supplies, before pulling higher on bargain hunting.
“Expectations of a large coffee yield from Brazil provided... bearish sentiment,” said The Public Ledger, a leading commodities publication.
By Friday on NYBOT-ICE, Arabica for delivery in September grew to 157.95 US cents a pound from 152.30 cents a week earlier.
On LIFFE, Robusta for delivery in September dropped to $2,071 a tonne from $2,108.
COCOA: Cocoa futures retreated after rising over the previous two weeks.
“Profit taking at the highs on Tuesday was... responsible for some of the downward price slide in cocoa,” said The Public Ledger.
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in September stood at £1,486 a tonne compared with £1,579 for the expired July contract a week earlier.
In New York on the NYBOT-ICE, cocoa for September stood at $2,137 a tonne compared with $2,250 for July.
Sugar prices gained on tight supply concerns.
Rainy “weather in Brazil has been the main driver of the markets in the past two weeks,” said Sucden brokers analyst Nick Penney.
“What is also supporting values is the weakening dollar,” which makes dollar-denominated sugar cheaper for buyers using rival currencies.
By Friday on LIFFE, the price of a tonne of white sugar for delivery in August jumped to $604 from $571.20 a week earlier.
On NYBOT-ICE, the price of unrefined sugar for July grew to 20.56 US cents a pound from 20.18 cents.
RUBBER: Prices slipped on slower demand amid weak Chinese manufacturing output and the eurozone debt crisis, analysts said.
By Friday, the Malaysian Rubber Board’s benchmark SMR20 fell to 279.05 US cents a kilo from 286.05 cents the previous week.