Oil

IN the New York market, oil prices fell on November 15, when an increase in the US weekly jobless data and disappointing earnings results stoked economic concerns, and the market focused on violence in the Middle East.

Data showing the euro zone slipped into its second recession since 2009 in the third quarter also weighed down prices.

Disappointing results from Wal-Mart Stores Inc. and the looming US ‘fiscal cliff’ also pressured equity and oil markets.

The expiring December Brent contract settled at $110.98 a barrel, after stalling ahead of the 50 day moving average of $111.26 a barrel, in light trading. The more actively traded January Brent, which will become the front month contract on November 16, dipped 47 cents to settle at $108.01 a barrel. December US crude oil futures fell 87 cents to settle at $85.45 a barrel.

The gains in front month Brent pushed the contract’s premium to December US oil futures out to $26 a barrel during intraday trade, the highest since October 2011. Oil traders have been balancing supply risks from the Middle East and export problems from the North Sea against ongoing worries about the impact of the struggling economy on global fuel demand.

The International Energy Agency (IEA) has released its World Energy Outlook for 2012. The central scenario of the Outlook sees the United States becoming a net exporter of natural gas by 2020 and almost completely self-sufficient in energy by 2035.

The US, which currently imports around 20 per cent of its total energy needs, becomes all but self-sufficient in net terms — a dramatic reversal of the trend seen in most other energy importing countries, it said.

The forecasts by the IEA, which advises large industrialised nations on energy policy, were in sharp contrast to its previous reports, which saw Saudi Arabia remaining the top producer until 2035.

The IEA says that, as a consequence of the US becoming a net oil exporter, nearly 90 per cent of Middle Eastern oil exports will be drawn to Asian markets by 2035. At the same time, global energy demand will grow by over one-third, with China, India and the Middle East region accounting to 60 per cent of that growth.

Fossil fuels are set to remain dominant in the global energy mix — boosted by subsidies that stood at US $523 billion in 2011 — pushed up by increases in the Middle East and North Africa. Unconventional and deep water oil will support non-Opec supply over this decade; by the IEA forecast, Opec will become increasingly important after 2020. Iraq’s fossil fuel reserves will account for 45 per cent of the growth in global oil production by 2035, overtaking Russia to become the second-largest oil exporter.

Renewable energy is forecast to become the second biggest source of electricity generation by just 2015, and will be closing in on coal generation by 2035. The IEA emphasises that the growth rest on the continuance of subsidies to the industry — which amounted to $88 billion last year. The report suggests that a massive $4.8 billion in subsides will be required by 2035 to support the growth, with more than half already committed to existing projects.

The IEA says it saw US oil production rising to 10 million barrels per day (bpd) by 2015 and 11.1 million bpd in 2020 before slipping to 9.2 million bpd by 2035.

Saudi Arabian oil output would be 10.9 million bpd by 2015, the IEA said, 10.6 million bpd in 2020 but would rise to 12.3 million bpd by 2035.

This would see the world relying increasingly on Opec after 2020 as, in addition to increases from Saudi Arabia, Iraq will account for 45 per cent of the growth in global oil production to 2035 and become the second-largest exporter, overtaking Russia.

Opec’s share of world oil production will rise to 48 per cent from 42 per cent now.

Russian oil output, which over the past decade has been steadily above Saudi Arabia, is predicted to stay flat at over 10 million bpd until 2020, when it will start to decline to reach just above nine million bpd by 2035.

The IEA analysis confirms that oil prices will continue to rise even with increased oil production. This is due to the incremental increase in world oil demand exceeding the incremental increase in oil supplies. More oil from US producers does stimulate economic growth for the United States but it does not mean lower pump prices.

Gold

IN the London market, gold eased on November15 as evidence that Europe’s debt crisis has hurt economic growth knocked equities lower and the dollar firmed against a currency basket, but worries about the approaching US fiscal ‘cliff’ underpinned prices. Stock markets fell in Europe after a report showed economic growth in Germany, Europe’s largest economy, cooled to 0.2 per cent in the third quarter, while data showed the wider euro zone has slipped back into recession.

Losses in stocks helped push spot gold down 0.45 per cent to $1,718.24, while US gold for December was down $11.60 an ounce to $1,718.50.

Global jewellery consumption dipped two per cent to 448.8 tonnes, the WGC report showed, while coins and bar demand fell 30 per cent. European investors, particularly in German-speaking markets, accounted for half of the 128.1 tonne drop in bar and coin demand.

In the Singapore market, gold slipped on November 15 as share prices fell, but tensions in the Middle East and worries about the US ‘fiscal cliff’ are expected to boost the metal’s safe-haven appeal and spur buying from investors.

The so-called ‘fiscal cliff’ — a combination of government spending cuts and tax rises due to go into effect in early 2013 unless Congress acts — could reduce the US budget deficit but may also tip the economy back into recession.

Gold fell $3.01 an ounce to $1,723.04. It rallied to a three-week peak of around $1,738 on November 9, when investors bought the metal on expectations that US monetary policy will remain loose after President Barack Obama’s re-election.

Global gold demand dropped 11 per cent in the three months to September from record levels seen in the same period last year, dampened mainly by fading Chinese fervour as its economy slowed, with stronger Indian demand stemming a larger fall, the World Gold Council said.

However, bullion demand to back gold exchange-traded funds — which issues securities backed by physical metal — jumped to 136 tonnes in the third quarter from 87.4 tonnes a year ago.

Cocoa

IN the New York / London market, Cocoa futures rallied again on November 15 as investors continued to pile into beans, fearing a potential disruption to supplies from the world’s top producer Ivory Coast after the unexpected dissolution of the West African country’s government. Arabica coffee futures on ICE slumped to their lowest level in more than two years because of rising stocks.

ICE March coca settled up $26, or 1.06 per cent, at $2,483 per tonne after hitting an intraday high of $2,488 per tonne. Prices rallied three per cent, their largest daily rise in 10 weeks, on November 14.

March Arabica coffee futures remained under pressure after hitting $1.4945, the lowest level for the second month since June 2010, weighed down by forecasts of bumper output. Arabica coffee futures have lost around one-third of their value so far this year.

In the New York market cocoa futures jumped to a more-than-three-week high earlier in the week after Ivory Coast’s president dissolved his cabinet, reigniting concerns of political instability in the world’s largest producer of the main raw ingredient in chocolate.

Political strife in the nation previously has rocked the cocoa market. This new standoff comes almost two years since Mr Ouattara was elected in a contentious vote that sparked months of violence. The election aftermath also included a cocoa export ban from Ivorian officials that sent prices for the commodity to a 32-year high in March 2011.

The latest political turmoil in the supplier of more than a third of the world’s cocoa set off a rally. Cocoa for delivery in December on ICE Futures US gained 3.1 per cent to settle at $2,468 a ton. On the NYSE Liffe in London, cocoa for March delivery ended 2.8 per cent higher at £1,592 a ton

Ivory Coast produces about 40 per cent of the world’s supplies, according to the International Cocoa Organisation in London. The beans represent 20 per cent of the country’s gross domestic product.