LONDON, Oct 13: Commodity markets mostly fell this week as investor sentiment was rocked by gloomy downgrades to global economic growth forecasts, but oil prices spiked on geopolitical worries surrounding Syria.
The IMF slashed its growth forecasts for countries across the world, citing the festering debt crisis in Europe, a stuttering recovery in the US and a slowdown in commodities-hungry China. The IMF cut its 2012 global growth forecast to 3.3 per cent, from its July estimate of 3.5 per cent, with Asia still leading the pack of expanding regions while Europe contracts an expected 0.4 per cent this year.
Global growth will only hit 3.6 per cent next year — lower than the 3.9 per cent predicted in July — as even powerful emerging economies like China, India and Brazil hit the brakes, the Fund said.
“As the world is dealing with falling growth and lower corporate earnings, commodities need to adjust accordingly. The IMF report this week was a catalyst, not new news,” Saxobank economist Steen Jakobsen told AFP.
The World Bank meanwhile slashed its 2012 economic growth forecast for developing countries in East Asia and the Pacific to 7.2 per cent, dragged down by China’s worst economic performance in 13 years. It added that China’s economy — a key consumer of many raw materials -- would grow just 7.7 per cent this year, down from 9.3 per cent in 2011 and its slowest rate since 1999.
Oil: Crude oil prices soared to their highest levels for three weeks, driven by fears of an escalating crisis between Syria and Turkey.
“The support... has come from the rising tensions in the Middle East as Turkey and Syria start facing up to each other,” said Angus Campbell, head of market analysis at trading firm Capital Spreads.
“The risk is of escalation into something more serious that would really send prices, which are already loaded with geopolitical risk, rocketing.” Brent jumped on Thursday to $116.02 a barrel — the highest level since September 17. And on Wednesday, New York crude hit $93.66 — which was last reached on September 21.
Oil had already rallied by about $3 on Tuesday on heightened concerns that the Syrian conflict could spread to Turkey after border skirmishes over the past week. Turkey’s interception on Wednesday of a Syrian Air aircraft en route from Moscow to Damascus, forcing it to land in Turkey, added to tensions that have seen cross-border shelling.
Ankara says the plane was carrying military equipment and ammunition for the Syrian government, which along with Russia has angrily rejected the allegation. The plane was carrying a legal cargo of radar equipment, Russian Foreign Minister Sergei Lavrov said on Friday.
Brent oil prices have also won strong support this week from delays to scheduled maintenance on facilities in the North Sea. At the same time, sentiment was dampened by economic growth forecast downgrades from the IMF, the World Bank and the Asian Development Bank.
In another blow, the IEA on Friday trimmed its forecast for crude demand growth over the next five years, sparking a round of profit-taking. The IEA, also predicted global oil demand would grow by half a million barrels per day less than previously estimated during 2011-2016.
Adding to those worries is Spain’s continued refusal to ask for a bailout from international lenders despite the woeful state of its finances. Ratings agency Standard & Poor’s also raised alarms over Madrid when it downgraded it two notches on Wednesday to just above “junk” status.
By late, Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in November leapt to $114.73 a barrel from $111.80 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for November soared to $92.24 a barrel, from $90.31 a week earlier.
Precious metals: Gold fell on profit-taking, having surged close to a one-year peak the previous week, dragging other precious metals lower. By late Friday on the London Bullion Market, gold dipped to $1,766.75 an ounce from $1,784 a week earlier.
Silver fell to $33.79 an ounce from $34.85.
On the London Platinum and Palladium Market, platinum decreased to $1,678 an ounce from $1,711.
Palladium reversed to $650 an ounce from $667.
Base metals: Base or industrial metals fell sharply on economic concerns, particularly in China, with aluminium, lead and nickel plumbing their lowest levels since September.
“The past week has seen a broad move lower across the base metals complex,” said Barclays Capital analysts.
“The trigger for this pullback was resurgence in macro pessimism, particularly focussed on the growth outlook for China.”By late Friday on the London Metal Exchange, copper for delivery in three months decreased to $8,168 a tonne from $8,321 a week earlier.
Three-month aluminium fell to $2,002 a ton from $2,114.
Three-month lead dropped to $2,156 a ton from $2,275.
Three-month tin declined to $21,676 a ton from $22,525.
Three-month nickel slid to $17,290 a ton from $18,654.
Three-month zinc sank to $1,937 a ton from $2,065.
Cocoa: Prices fell to the lowest points since July on receding supply worries in top global producer Ivory Coast.
“Cocoa had a nice run higher over July and August on speculation that dry weather will hurt crops in West Africa and Southeast Asia,” said analyst Ed Meir at commodities brokerage INTL FCStone.
“In addition, there was concern over the direction of the Ivory Coast’s pricing regime, since the concern was that a badly managed marketing process could wreak havoc on the markets.
“However, fears about both these issues have receded in recent weeks, which may be why prices have now sold off to seven-week lows.” By Friday on LIFFE, London’s futures exchange, cocoa for delivery in December slid to £1,524 a tonne from £1,533 a week earlier.On New York’s NYBOT-ICE exchange, cocoa for December sank to $2,360 a ton from $2,406.
Sugar: Sugar futures also hit reverse gear. “Fears about the global economic outlook amid the ongoing European debt crisis are weighing on soft commodities,” added Barclays Capital analysts.
By Friday on NYBOT-ICE, the price of unrefined sugar for March stood at 20.47 US cents a pound compared with 21.37 cents.
On LIFFE, the price of a ton of white sugar for delivery in December fell to $566 from $595.70 a week earlier.
COFFEE: Coffee prices retreated on easing weather concerns in major producer Brazil, dealers said. By Friday on NYBOT-ICE, Arabica for delivery in December decreased to 160.70 US cents a pound from 173.90 cents a week earlier.
On LIFFE, Robusta for November declined to $2,060 a ton from $2,140.
Rubber: The market dipped in subdued trading amid mounting fears over the weak state of the global economy, dealers said.
The Malaysian Rubber Board’s benchmark SMR20 declined to 302.80 US cents a kilo, from 307.35 cents the previous week.—AFP