Oil:
THE International Energy Agency in its Oil Market Report April 2012, forecasts global oil demand at 89.9 million barrels per day in 2012, a rise of 0.9 per cent over 2011. The underlying crude price assumption has been raised, Brent crude now averages $115/bbl for 2012.
Meanwhile global oil supply fell by 0.4 million b/d to 90.3 million b/d in March, with higher Opec NGL and crude production only partially offsetting a 0.5 million b/d decline from non-Opec countries. Non-Opec supply fell to 52.7 million b/d in March from the prior month.
Supplies declined in all regions but most notably in the UK North Sea and at synthetic crude plants in Canada, Opec supply in the month of March held near three and a half year highs at 31.43 million b/d. Higher output from Iraq, Libya and the UAE more than offset reduced Iranian and Angolan supplies. Saudi production was unchanged at 10 million b/d.
Brent crude oil slumped more than 2 per cent on May 17, to end at the lowest level since December, as investors avoided risky assets due to mounting fears that turmoil in Greece could spread to other stressed euro zone economies. The Brent contract struck a session low of $106.98, also the lowest intraday price since December 30. From the beginning of May, front-month Brent has fallen $11.67, or nearly 10 per cent. US crude settled at $92.56, down 25 cents, the lowest close for front-month crude since November 2. From the beginning of the month, front-month crude has skidded nearly 12 per cent.
On May 16, crude oil futures fell in the New York market pressured along with US equities as banking troubles in Greece sparked risk aversion across markets worried about euro zone debt.
The European Central Bank confirmed a Reuters report that it has stopped providing refinancing to some Greek banks as they are severely undercapitalized. The news pressured Wall Street and oil, as the dollar surged against the euro.
Also keeping oil prices lower was news that US President Barack Obama was expected to seek support from other Group of Eight leaders to tap emergency oil reserves later this summer before the European Union’s July embargo of Iranian crude.
In London, ICE Brent for June delivery expired and settled at $111.71 a barrel, down 53 cents, after volatile trading between $110.41 and $112.10. Front-month Brent fell for the fourth time in five sessions. The July Brent contract closed at $109.75, dropping $1.70.
Oil industry executives and bankers are assuming oil prices will stay above $100 a barrel in the year ahead, despite mounting economic worries, as any fall below that level would trigger a cut in Saudi Arabia’s output and force closures at high-cost projects around the world.
At a previous summit last June, most respondents also saw prices above $100. Then worries centered around supplies following a full outage of Libyan output and Opec’s failure to boost production to compensate for the loss. By contrast, the current mood is dominated by demand concerns as euro zone collapse worries, poor US economic data and signs of slower demand in China overshadow jitters about a potential loss of Iranian oil supplies.
But although Brent prices are almost $20 down from their 2012 peaks at $110 a barrel, few expect a repeat of the 2008 crash which saw them collapsing to $34 per barrel from an all time high of $147 in a space of six months.
Saudi Arabia has ramped up output to 10 million b/d – the highest in decades – to calm market fears over a potential outage of Iranian oil flows amid Tehran’s stand-off with the West over its nuclear program. Riyadh has said it wants oil to fall to around $100 a barrel as higher levels damage the global economic recovery.
Saudi’s current desired oil price level is only a third higher than $75 per barrel it sought back in 2008. But its oil price budget needs are estimated to have doubled from $50 to $100 as it had to splash money to calm discontent at home and unrest among neighbors.
Gold:
ON May 17, gold rose more than 1 per cent, bouncing off a 4½ month low, as weaker prices attracted new physical buyers, but gains were likely to be limited as the euro was undermined by fears of a deepening debt crisis in Greece spot gold rose 1 per cent to $1553.8 an ounce.
In the New York market, gold sank to a 2012 low on May 16 before paring losses in choppy trade, as traders were torn between hope that France and Germany would work together to keep the euro zone intact and new signs of stress in the Greek banking sector.
Bullion briefly crossed into bear market territory, down 20 per cent from its record last September, as intensifying fears a Greek exit from the euro zone would worsen the debt crisis gripped financial markets earlier in the day.
Spot gold slipped $4 or 0.3 per cent to $1,539.86 an ounce as Euro woes resurfaced. It hit a session low of $1,527 – the lowest since December. Gold’s stretch of losses are the longest since December. US gold futures for June delivery slid more sharply, falling 1.2 per cent or $18.5 an ounce at $1,538.86 and hitting the lowest price for a most-active contract since July.
Prices later recouped most of their losses following a meeting between new French President Francois Hollande and German Chancellor Angela Merkel at which they pledged to forge a joint approach for an EU summit next month. That eased concerns of a spat that couldworsen the euro zone crisis.
Gold demand in China may surge as much as 30 per cent this year as rising incomes boost consumption, helping the country topple India as the world’s largest bullion market on an annual basis, according to the World Gold Council.
Higher demand in the world’s largest gold producer may help arrest a slump in prices, which have plunged from last year’s record as investors favored the dollar amid concern Greece may quit the euro. Global gold demand fell 4.6 per cent to 1,097.6 tons in the first quarter, the council said in a report.
Bullion has rallied for 11 years, gaining through the financial crisis that started in 2008, as investors bought the metal to protect their wealth from currency debasement and inflation. Goldman Sachs Group Inc. (GS) said in a May 9 report the precious metal remains the so-called currency of last resort. Demand in China totaled 255.2 tons in the three months of March 31 from 232.5 tons a year earlier, the council said in the report. Investment demand gained 13 per cent, while jewelry demand increased 7.9 per cent to 156.6 tons, makingChina the world’s largest jewelry market for a third quarter.
In India, demand fell to 207.6 tons in the first quarter, from 290.6 tons a year ago, after the government hiked taxes and import duties, the council said. Investment demand dropped 46 per cent and jewelry demand fell 19 per cent, it said. A drop in annual demand this year would be the second straight fall.
Copper:
LONDON copper edged higher for the first time in five sessions on May 17, with a firmer euro aiding its bounce from four-month lows hit in the previous session amid a deepening debt crisis in Europe exacerbated by Greece’s political instability.The modest gains in copper suggests many investors are wary of bidding up prices aggressively given the contagion potential of a euro zone without Greece, a slowdown in top copper consumer China and the fragile state of the US economy.
Investors are worried that a decision by Greece to leave the euro zone would raise big questions about the impact on Spain, Italy and other nations within the block with big debt loads and could cause serious consequences.
The euro edged higher against the dollar after plunging to a four-month low the day before, while the dollar index eased from a four-month high against a basket of currencies, supporting prices of commodities priced in the greenback. Three-month copper on the London Metal exchange gained 0.7 per cent to $7,710.50 a metric ton falling to a four-month low of $7,625 on May 16.
The most-traded August copper contract on the Shanghai Futures exchange rose nearly 1 per cent to 55,220 yuan ($8,700) a metric ton, having slid to a 2012 low of 54,660 yuan in the prior session.