World commodities

Published Mar 10, 2014 07:40am

Oil

The oil price slipped to near $103 a barrel on March 5, as concerns over Russia’s military advance into Ukraine eased, but the situation remained tense overall. Brent crude, used to set prices for international varieties of crude, was down 63 cents at $108.67/barrel on the ICE Futures exchange in London.

Investors are concerned there might be economic sanctions against Russia, which was the world’s second largest producer of oil in 2012 and the top exporter of natural gas. Any sanctions could limit world supply and push up prices. Europe relies on Russia for almost a third of its supply of crude, natural gas liquids and refined oil products, according to International Energy Agency (IEA).

Brent for April delivery closed at $107.76/barrel on ICE Futures Europe in London on March 5, having reached a two month high of $111.20 on March 3. European members of the IEA imported an average of 4.4m barrels/day of crude, natural gas liquids, refined oil products and other feedstocks from Russia in 2012, accounting for 32pc of consumption.

While EU members successfully imposed an embargo on oil imports from Iran in July 2012 to pressure the country over its nuclear programme, their energy trade with Russia is almost eight times larger. The EU imported crude oil and natural gas from Russia worth $156.5bn in 2012, compared with $19.6bn from Iran prior to the sanctions in 2011. The US is far less dependent, importing crude from Russia valued at $4.1bn in that year.On March 6, crude oil prices eased in Asia on US supply gains and waning fears of a Russian invasion into Ukraine that could threaten global supply. On the New York Mercantile Exchange, West Texas Intermediate crude for delivery in April traded at $101.11/barrel, down 0.34pc from an overnight session low of $101.31/barrel and a high of $103.53/barrel.

The lack of upward movement in oil prices has already had an impact on the behaviour of important oil-producing nations such as Saudi Arabia, Qatar, Kuwait, UAE, Oman and Bahrain. These nations have slowed the pace of budgetary expansion from a regional average of 14pc growth last year to less than 3pc this year.

Iraq is reclaiming its rank as the world’s fastest-growing oil exporter, cushioning consumers from Libyan supply outages for now and, perhaps, reviving Opec market share rivalries down the road.

With many export bottlenecks now cleared at the southern Basra terminals — from which almost all of Iraq’s crude is shipped — Baghdad is expected to keep up, or even exceed, the rapid pace of oil sales reached in February — at 2.8m barrels/day (bpd), a 500,000 bpd rise on the previous month.

So far, the leap in Iraqi shipments has yet to weigh on oil prices.

Gold

Gold was trading in a tight range on March 6, supported above $1,335/ounce by weak US data, with investors awaiting further cues from developments in Ukraine and a key jobs report.

Tensions between Russia and the West over Ukraine should in the meantime support gold, often seen as a safe-haven asset.

Spot gold was trading nearly flat at $1,337/ounce rising slightly by 0.2pc in the previous session on soft data on US private hiring and services sector growth.

In the London market, gold was lower on March 6 as diplomatic efforts to cool the Ukraine crisis depressed demand for assets seen as safe, but the metal found support above $1,330/ounce from weak US economic data and ahead of a key employment report.Spot gold was down 0.1pc at $1,335.50/ ounce while gold futures for April delivery fell 0.3pc to $1,335.60.

Gold hit a four-month high on March 3 near $1,355/ounce after Russia’s incursion into Ukraine’s Crimea region over the weekend.

In the New York/London market, gold edged higher on March 5, after weak US private sector job data and lack luster services – sector activities. Platinum rose to its highest price since early September on supply fears after wage talks collapsed between the world’s top platinum producers and South Africa’s Association of Mineworkers and Construction Union. Spot gold was up 0.2pc at $1,337.54/ounce, while US Comex gold futures for April delivery settled up $2.4. at $1,340.30.

Platinum reached its highest since September 9 at $1486.0/ounce after three major producers, Anglo American Platinum, Impala Platinum and Lomin said the government mediated talks with AMCU had broken down. The AMCU strike which began on January 23, has hit 40pc of global production of the precious metal. South Africa producers around 75pc of the world’s platinum.

Copper

In the New York market, copper prices rose on March 4, shaking off two-month lows as investors returned to the growth – sensitive asset amid easing fears over Ukraine. Copper prices had plunged to $3.1720/lb a day earlier, extended recent losses to the lowest close since December 3. The declines were driven by weaker Chinese economic data, which intensified concerns about weaker copper demand from the world’s largest copper consumer.

Three month copper on the London Metal Exchange rose 0.2pc or $14.13 on March 5 to trade at $7062.52/tonne.

Coffee

Brazil’s worst drought in decades has badly affected coffee and sugar. It hardly has rained in some of the country’s top farming regions since the start of the year, a period when precipitation is usually the heaviest. Futures prices for the Arabica coffee variety are up 67pc since the start of the year. Raw sugar prices have risen by 8pc. The withered coffee trees and parched sugarcane fields stand in contrast to the bumper crops that have weighed on commodities in recent years.

Brazil is the source of about one-third of the world’s annual coffee crop, and more than one-fifth of the sugar output.


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