Oil: ON August 8, oil fluctuated after falling for the first time in four days in New York as speculation that China will take more steps to boost its economy countered signs of weakening demand in the US, the biggest crude user.

Futures were down as much as 0.1 per cent and then up 0.3 per cent. US petroleum consumption fell 1.1 per cent a fortnight back, the first drop in four weeks, according to a report from the Energy Department. China’s inflation cooled for a fourth straight month in July, providing more room for policies to stimulate growth in the world’s second-biggest oil consumer.

Oil for September delivery was at $93.65 a barrel, up 30 cents in electronic trading on the New York Mercantile Exchange. It fell 32 cents on August 8 to $93.35, the lowest settlement since August 6. The contract is up 20 per cent from its lowest close this year of $77.69 on June 28. Prices are 5.3 per cent lower since the start of the year.

Brent crude for September settlement gained 11 cents to $112.25 a barrel on the London based ICE Futures Europe Exchange.

The European benchmark’s premium to West Texas Intermediate was at $18.60, down from $18.79 on August 8.

A day earlier, oil prices had jumped to a 12-week peak, as falling North Sea output, support for more bond buying by the US Federal Reserves and Middle East tensions lifted crude futures to a third straight higher settlement.

Posting their highest settlements since May 15, Brent, US crude and refined products futures moved above key moving averages to add technical support to the day’s bullish sentiment. The second hurricane of the Atlantic storm season threatened Mexico and a fire damaged California’s second-largest refinery, lending more support to oil futures.

Brent’s premium to US crude pushed back above $18 a barrel. The North Sea production problems and threats to Middle East supply lifted Brent’s front-month premium to the nearby contract above $1.60 a barrel.

US gasoline and heating oil settled at near $3 a gallon, above that level intraday for the first time since May. Gasoline shot above its 100-day moving average of $2.9661 and heating oil above its 200-day moving average of $2.9921.

North Sea crude oil output is set to fall to a record low in September, adding to supply tightness with the European Union’s embargo on Iranian oil now in its second month. Asia is set to import record volumes of West African crude in 2012 as increasing supplies of high quality crude drive down prices and many buyers seek an alternative to Iranian barrels.

OPEC slightly upped its world oil demand growth forecasts for 2012 and 2013 on August ,9 but warned of a possible drop again next year due to the uncertain economic situation. For 2012, the Organization of Petroleum Exporting Countries predicted world oil demand at 88.72 million barrels per day (mbpd). up from the 88.68 mbpd estimate given in its previous report in July. Demand next year was put at 89.52 mbpd, up from 89.50 mbpd last month, according to the 12 nation cartel, which pumps one third of the world’s oil. This would mean an increase of 810,000 barrels per day (bpd) from 2012, compared to a 900,000 bpd hike expected this year.

It said oil use in the US, Japan and India had been growing for various reasons and demand in non-OPEC countries was gaining some strength. The only exception is European demand, which continues its downward trend, OPEC said. In Europe, OPEC said the debt crisis still overshadows the continent’s economic perspective. The negative sentiment is spreading across the region, leading to declining economic activity and hence reducing the use of energy in all sectors.

June oil consumption in Germany, France, Italy and UK fell as result of decreasing demand for industrial fuels, due to weak industrial activity. Elsewhere, OPEC sees Indian demand continuing to rise strongly. It said diesel usage rose 9% during the country’s power outage that left 600 million people without electricity. In June, Indian oil demand rose sharply by 7.2% year on year, the strongest demand since February. In China , however, oil demand eased in June, as half of its imports ended up in the country’s stockpile during that month, OPEC said.

Oil demand this year was especially up in the United States, Japan and India- where massive power grid failures and severe floods have led to increased consumption whereas it continued to fall in Europe, it noted.

In 2013 on the other hand, things looked less certain, despite OPEC’s slightly higher forecast compared. The economic picture is vague and the horizon full of turbulence. There is much uncertainty surrounding the world’s oil use estimate in 2013, it said.

The gloomy picture could reduce the world oil demand growth forecast by 20 per cent next year, it warmed. Even this year many of the regions that have seen a hike in demand have done so because of natural disasters or unforeseen events, Japan’s nuclear plant shutdown and India’s floods making the outlook for the rest of the year hard to predict, OPEC added.

Gold

GOLD rose to the highest level in a week as China’s inflation cooled and before a report that may show an increase in US jobless claims, boosting optimism that central banks may take steps to bolster the global economy.

Gold for immediate delivery gained as much as 0.4 per cent to $1,618.80 an ounce, the highest since July 31, and traded at $1,615.89. December-delivery gold rose as much as 0.3 per cent to $1,620.30 on the Comex.

Consumer prices rose 1.8 per cent from a year earlier, the lowest rate since January 2010, while producer prices fell 2.9 per cent, the fifth straight drop, said the National Bureau of Statistics. That may encourage policymakers to introduce more stimulus measures.

The Federal Reserve said August 1 it will add stimulus if necessary to boost growth and cut an unemployment rate that has been 8 per cent or higher for more than three years. Holdings in exchange-traded products backed by gold gained 0.3 per cent to 2,411.721 metric tons on August 8, the highest since July 6.

Speculation that the Fed may unveil another round of stimulus measures and that the European Central Bank is set to take action on the euro zone debt crisis has kept gold firmly underpinned above $1,600 an ounce last week, despite a bout of dollar strength.

A better outlook for the euro zone would support the euro and consequently gold, while another round of quantitative easing (QE) to boost US growth would probably undermine the dollar while boosting liquidity, keeping interest rates low and stoking inflation fears.

Gold demand in major consumer India was soft at the start of the festival season, meanwhile, with rural buyers staying on the sidelines, preferring to hold on to their cash at a time when deficient monsoon rains threaten to dent their incomes.

The rural population accounts for 60 per cent of the gold demand from India. Gold buying has already been hit in India by rupee weakness, which keeps local prices high, and a hike in import taxes aimed at cutting the trade deficit.

In China, which is currently vying with India as the world’s top buyer of gold, the trading volume on the popular gold spot deferred contract on the Shanghai Gold Exchange stood at 11,468 contracts on August 7 after double-counting, down nearly 30 per cent from July’s average daily volume.

Gold prices steadied above $1610 on ounce on August 9, surrendering early gains as the euro extended losses, though speculation that central banks will unveil more monetary stimulus measures to boost growth firmly underpinned the metal.

Copper

IN the London Market copper rose to a one week high on August 7, as the dollar softened and investors saw prospects for the EU to take new steps to shore up its faltering economy, but slack metals demand in top consumer China kept a lid on prices.

Markets have enjoyed a strong run after the European Central Bank (ECB) promised to buy bonds to ease pressure on Spain and Italy, albeit under strict conditions that are yet to be spelled out. Expectations the ECB will act soon boosted the euro, which neared a one-month high against the dollar. A weaker dollar makes dollar priced commodities such as metals more affordable for holders of other currencies.

Three month copper on the London Metal Exchange closed at $7580 a tonne from $7495 at the close on August, 7. It hit a session high of $7612, its highest since July 31. But prices are still about 13 per cent below the year’s high hit in February.

On the following day i.e. August 8, copper retreated from a one week high as a weak euro weighed on metals. Benchmark copper on the London Metal Exchange closed at $7550 a tonne, down 0.40 per cent from a close of $7580 a day earlier, when it hit a one week intraday high . Copper was little changed on August ,9 as stronger dollar weighed on the metal, while support come from strong US job figures and prospects of monetary easing in top metals consumer China after subdued manufacturing and inflation data . In July, annual growth in China’s factory output slowed to the weakest level in more than three years, while annual consumer inflation fell to a 30 month low of 1.8 per cent.