Oil:
In the London market, the price of oil set a record high of above $146 a barrel on July 3, owing to falling reserve of US crude, simmering tensions over Iran and a weak dollar. Brent North Sea oil for August delivering surged to a life time peak of $146.69 a barrel after breaching $146 for the first time earlier in the day (July 3).
Oil prices, which have doubled in value over the past year, were partly driven by news that American crude stockpiles fell by 2.0 million barrels to stand at 299.8 million barrels in the week to June 27. The US crude inventories were 15.3 per cent lower than at the same stage one year ago.
The latest record-breaking price surge also came after Iranian Oil Minister Gholam Hossein Nozari said that Iran would react fiercely to any military attack against the oil exporter. The Opec oil exporting group said recently that it would be difficult to replace the crude output of Iran should the country face attack.
Consumer countries and the rich world’s energy watchdog, the International Energy Agency, stress that fear of a shortage of supplies to meet surging demand from Asian and Middle Eastern economies was causing the market tension. Producers in the Organisation of Petroleum Exporting Countries, which have spare capacity to boost supplies, pin the blame on financial market speculators and the weakening dollar.
Although record prices boost the coffers of oil producers, they are also a danger for the long-term because they encourage conservation and investment in alternative sources of energy.
Opec oil supply rose for the second consecutive month in June, led by higher output from the group’s top two producers Saudi Arabia and Iran. Supply from the Organisation of the Petroleum Exporting Countries climbed to 32.22 million barrels per day (bpd) in June from 32.12 million bpd in May.
The increase has failed to lower the price of oil, which hit a record high near $146 a barrel on July 3. Saudi Arabia is pumping more, but violence has hit Nigerian output and growth is flagging in some big non-Opec producers, such as Russia.
Saudi Arabia, the world’s top exporter, pumped 9.45 million bpd in June, up 200,000 bpd from April, according to the survey. It plans to raise supply further to 9.7 million bpd in July.
Opec has come under pressure from consumer nations concerned by high prices for more oil. But the exporter group says factors other than supply, such as speculation and the weakening dollar, are lifting prices. Opec pumps about two in every five barrels of oil.
Output also rose in Iran, the second-largest Opec producer, which moved some of the unsold oil it had been storing at sea during June. Falling output in Nigeria and Iraq limited the size of the supply boost. Nigerian production dropped by 60,000 bpd due to attacks on oil installations, leaving supply below that of Angola. Nigeria is historically the top African oil exporter.
The International Energy Agency cut more than 3 million barrels a day from its 2012 global demand forecast because record prices and slower economic growth will curb fuel purchases.
Oil above $140 is dampening consumption of motor fuels in the 27 nations advised by the Paris-based IEA, which cut demand estimates for each year between 2009 and 2012 by about 3 per cent.
Growth in global supply capacity will peak at about 2.5 million barrels a day in 2010, slowing to less than a million a day for the following three years, the report said.
Global oil demand will expand by 1.5 million barrels a day, or 1.6 per cent a year on average in the five years between 2009 and 2013, the agency said, compared with a forecast of 2.2 per cent a year to 2012 in its previous report, used last July.
The agency trimmed its 2012 outlook most, by 3.43 million barrels a day, or 3.7 per cent, to 92.39 million barrels a day. Demand will be 94.14 million barrels a day in 2013.
The agency reduced output forecasts for countries outside the Organisation of Petroleum Exporting Countries by 1.41 million barrels a day, or 2.8 per cent, in 2012 to 50.68 million barrels a day.
The lower prediction was because of “an abrupt slowdown in Russia” as the country grapples with an unattractive tax structure that’s holding back investment.
Non-Opec production, including biofuels, will increase 0.5 per cent a year to 51.1 million barrels a day in 2013 from 49.9 million barrels a day this year, buoyed by increases in North and Latin America and the former Soviet Union.
Copper:
In recent days copper has moved up, due to little fundamental news and lack of demand from the biggest consumer China. Copper has held up well currently trading only at a five per cent discount from its all time peak of $8880 per tonne and could well test new highs.
Strong construction growth in Eastern Europe, India and China continues to generate demand for cables, piping and other copper intensive products.
Traders also say the market’s wary of shorting copper — selling in anticipation of lower prices — as stocks remain at historically low levels, which mean a possible strike could drive prices higher quickly.
Coffee/Cocoa/Sugar:
Coca prices have hit an all time high New York cocoa soared as high as $3190 a tonne, a level last seen in March 1980. ICE July cocoa rose $115 to $3367 a tonne. The beaus have gained 60 per cent this year amid fears about the crop in Ivory Coast, the world’s biggest producer.
Coffee prices also advanced, with Liffee July robusta coffee futures adding $80 to $2560 a tonne, a three month high. Prices rise were stoked by strike fears in Brazil which is the world’s biggest producer.
Sugar hit its highest price in almost four months on July 1, rising almost 5 per cent on the day, after a report of Brazil’s converting more cane into ethanol biofuel.
The Unica industry association of Brazil said sugar production in the world’s top grower fell 14 per cent in the first five months of this year compared with the same period in 2007 – while Brazilian ethanol use more than doubled to five billion litres.
The news drove sugar for October delivery up 0.64 cents to 13.74 cents a pound on the Intercontinental Exchange, taking its gains this year to 26 per cent.