Oil

LAST week oil tumbled to a six-week low after US crude inventories surged the most since March as production and imports rebounded from Hurricane Isaac. US is the world’s biggest crude user. Futures fell as much as 0.6 per cent, extending September 19 decline of 3.5 per cent, the biggest since July. Oil inventories surged by 8.5 million barrels a fortnight back as production and imports rebounded after companies reopened platforms in the Gulf of Mexico after Hurricane Isaac, Energy Department data showed. China’s manufacturing may contract for an 11th month in September, a private survey said.

Oil for October delivery dropped as much as 59 cents to $91.39 a barrel in electronic trading on the New York Mercantile Exchange. The more-active November future was at $92 a barrel, down 30 cents. Front-month prices are 7.5 per cent lower this year. Brent oil for November settlement fell 14 cents to $108.05 a barrel on the London-based ICE Futures Europe exchange. It dropped $3.84, or 3.4 per cent, to $108.19 on September 19. The front-month European benchmark grade’s premium to the corresponding West Texas Intermediate contract was at $16.37.

Stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, declined. Refinery operating rates rose to 88.9 per cent from the previous week’s 84.7 per cent as plants restarted units idled when Hurricane Isaac made landfall on August 28.

The global oil market is well supplied, said the Opec Secretary-General. The Organization of Petroleum Exporting Countries’ spare production capacity is at comfortable levels, and commercial inventories remain healthy.

Saudi Arabia is producing near the highest level in more than three decades. Its output has boosted supply from the Organization of Petroleum Exporting Countries to 1.63 million barrels a day more than the world needs this year, the group’s September 11 monthly report showed. The Opec basket price of 12 crudes was $110.95 a barrel on September 19, down from $113.72 on September 17.

Oil Minister Ali al-Naimi said September 10 that global supply, demand and inventories don’t justify current prices. The desert kingdom has worked with the United Arab Emirates and Kuwait, fellow members of the six-nation Gulf Cooperation Council, to raise output as US sanctions penalised customers buying Iranian oil.

Gold

LAST week gold prices hovered near a 6½ month high, it hit earlier after the BoJ became the latest central bank to announce a fresh round of bullion-friendly monetary easing. The Bank of Japan said that it will add 10 trillion yen ($127 billion) to a fund that buys assets. The metal climbed sharply a fortnight back after the Fed unveiled a third round of quantitative easing – money printing to buy bonds – following a ECB pledge to launch a new bond-buying programme. Earlier this month, the European Central Bank (ECB) launched is new and potentially unlimited bond-buying program, aimed at reducing crisis-hit euro zone countries’ borrowing costs. In the first week after the announcement, however, the ECB did not buy any government bonds.

Further monetary easing is expected to maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, as well as boosting liquidity, pressuring the dollar and fuelling long-term inflation concerns. Last week, the Federal Reserve unveiled plans for a third round of bullion-friendly asset-purchase program called quantitative easing or QE3. The announcement sent the price of gold to a fourth consecutive weekly rise. Some have warned that gold may not rise as much during QE3 as it did during two earlier rounds of quantitative easing.

Spot gold was down 0.2 per cent at $1,767.49 an ounce, while US gold futures for December delivery were down $1.50 an ounce at $1,769.70. Earlier, spot prices rose a high as $1,779.10, their strongest since February 29.

Gold prices erased gains as the euro fell against the dollar, with traders citing talk of European banks selling the currency and investors taking profits on its earlier gains versus the yen. The dollar held onto gains after data showed US housing starts rose by less than expected last month.

Interest in gold exchange-traded fund – popular investment vehicles for bullion which issue securities backed by physical metal – has been strong last week, with gold ETF holdings rising to an all-time high at 73.681 million ounces.

ETFs including New York’s SPDR Gold Trust and products operated by ETF Securities and Zurich Cantonal bank added 925,000 ounces of metal to their holdings on September 17 alone.

Meanwhile, platinum fell 2 per cent on September 18 in the New York market following news that striking platinum miners at South Africa’s Lonmin (LONJ.J) mine accepted a pay offer that could have them returning to work. Striking miners at major South African platinum producer Lonmin said they would return to work after six weeks of labor unrest during which 45 were killed.

After trading mostly higher earlier in the session, the metal suddenly nose-dived over $50, or 3 per cent, within 10 minutes in response to news of the agreement at Lonmin’s Marikana mine. The metal, mostly consumed as an autocatalyst, posted its largest two-day decline since March, as No. 1 producer Anglo American Platinum, also said it had resumed operations in the strike-hit Rustenburg area.

The fast-moving and somewhat unexpected news from South Africa, which holds more than 80 per cent of the world’s platinum reserves, pushed gold off its high and left bullion up slightly on the day. Analysts said that platinum prices are vulnerable to a pullback due to sluggish global industrial demand, but lingering labor issues with the South African mining sector should underpin prices. Palladium was down 1.7 per cent at $661.75 an ounce.

Copper

IN the London market, copper, edged up on September 19, but was far off a 4-½ month high touched earlier as investors weighed the Bank of Japan’s decision to ease its monetary policy against concerns that global financial stimulus measures would not necessarily boost physical demand. Benchmark three-month copper on the London Metal Exchange (LME) ended up 0.37 per cent at $8,350 a tonne, having earlier hit $8,422, its highest since earlier May.

Manufacturing activity in China stabilized in September after hitting a nine-month low in August, even though output dipped to its lowest level in 10 months, a survey of factory managers showed on September 20.

The HSBC Flash China manufacturing purchasing managers’ index (PMI) ticked up to 47.8, from 47.6 in August. The PMI number, which provides the first glimpse of September’s conditions for Chinese industry, seems to point to a month in which a slide was halted, but not reversed. China is the world’s top copper consumer, accounting for 40 per cent of refined demand.

Copper prices were mired in a negative territory for most of the year until the European Central Bank said it would buy back bonds on September 6, which was followed by a round of easing by the United States and then by Japan.

LME copper prices have since rallied almost 10 per cent. The most-traded January copper contract on the Shanghai Futures Exchange slipped 1.19 per cent to 59,800 yuan ($9,500) a tonne.

However, a nascent recovery in the US housing market helped keep a floor under copper prices. US home resale rose in August to their highest in more than two years and groundbreaking on new homes also climbed, signs that a budding housing market recovery is gaining traction. Markets are awaiting a slew of manufacturing sector reports from Europe for more trading cues.

On the LME, data showed copper stocks fell 1,350 tonnes to 212,575 tonnes, their lowest point since October 2008.

Some of the other base metals also gained on the back of central bank stimulus. Lead hit its highest since late January at $2,306.75 a tonne and zinc, used to galvanize steel, rose to its highest since late February at $2,153.75 a tonne. Lead ended down 0.13 per cent at $2,271 a tonne while zinc closed up 0.74 per cent at $2,123.50 a tonne.

The global zinc market was in surplus by 135,000 tonnes in the first seven months of the year, while the global lead market was in surplus by 49,000 tonnes in the first seven months of the year, a monthly bulletin from Lisbon-based International Lead and Zinc Study Group showed.

LME stocks of aluminum have climbed since the 2008 credit crisis due to anaemic industrial demand and increased use of the metal by banks as a financing tool raises physical premiums and encourages smelters to overproduce. They hit a record high of 5.126 million tonnes in February.

Tin closed at $21,400 a tonne, down 0.90 per cent though the soldering metal was still near a 4-½ month high. Stainless steel material nickel ended down 0.36 per cent at $17,755 a tonne.

The global nickel market was in supply surplus by 26,000 tonnes in the first seven months of 2012, the latest monthly bulletin from Lisbon-based International Nickel Study Group (INSG) showed.