AfkInsider Commodities Report: Oil Prices Surge, Gold Higher

AfkInsider Commodities Report: Oil Prices Surge, Gold Higher

Several commodities began the second half of 2013 on a stronger note.

Crude oil prices were up this week on the escalating political crisis in Egypt and fears of supply disruptions if passage through the Suez Canal is affected. Oil futures prices were also boosted by a fall in U.S. crude stockpiles last week as well as more positive economic data. Gold rebounded from last week’s near three-year lows on a pickup in physical buying. Other precious metals also tracked higher.

West Texas Intermediate crude for August delivery on the New York Mercantile Exchange (Nymex) moved up through $100 a barrel for the first time in nine months to $102 a barrel on July 3, its highest in over a year. The U.S. Energy Information Administration (EIA) reported that U.S. crude stockpiles declined for the first time in four weeks. The EIA said U.S. inventories dropped 10.3 million barrels to 383.8 million barrels in the week ending June 28. Following its own survey, the American Petroleum Institute (API) reported on July 2 that U.S. crude inventories dropped 9.36 million barrels the previous week to 382.6 million barrels.

Brent North Sea crude, which is the international benchmark and as such is more sensitive to worries over potential disruptions to Suez Canal traffic, touched $105.76 a barrel, basis the August contract, on the London-based ICE Futures Europe exchange following rumors that a military coup was underway in Egypt. August Brent was trading at $102.16 July 1.

Gold rallied on renewed buying interest from China, the world’s second biggest consumer of gold behind India. Chinese buyers were tempted back into the market after prices of the precious metal last week declined to their lowest level since August 2010. In the quarter ending June 30, gold prices recorded their biggest ever quarterly loss – of 23 percent – on expectations that the U.S. Federal Reserve soon will scale back its bond-purchasing program.

Spot gold climbed to $1,254 an ounce on July 2. The yellow metal had hit a near three-year low of $1,181 an ounce on June 27. Nevertheless, the potential upside for gold prices is seen as limited given the precious metal’s bearish fundamentals.

Upbeat factory surveys from the U.S., U.K. and Japan July 1 helped take copper to a two-week high, with the price of the red metal for delivery in three months on the London Metal Exchange (LME) climbing to $7,061 a tonne. However, ongoing worries that economic growth in China is slowing as well as a stronger U.S. dollar pushed copper and other industrial metals down again by midweek with three-month LME copper trading at $6,933 a tonne at midday July 3.

Wheat and corn prices on U.S. futures exchanges fell to multi-month lows early this week amid easing concerns over U.S. crop prospects, before finding some support from Chinese and Egyptian wheat purchases by midweek. The U.S. Department of Agriculture (USDA) in its latest planting and stocks reports released on June 28 said it estimates U.S. wheat acreage at a four-year high of 56.53 million acres in the 2013 market year, while U.S. corn acreage is estimated to total 97.4 million acres, the most since 1936 and marginally up on the prior year. The September wheat contract on the Chicago Mercantile Exchange fell to $6.5238 a bushel July 2, the lowest since June 2012. On the Chicago Board of Trade (CBOT), corn futures for September delivery dropped to $5.2737 a bushel at one point July 2, the weakest level since late November 2010.

However, U.S. wheat futures rebounded on July 3 as China increased imports following rain damage to its domestic crop and the world’s largest wheat importer, Egypt, agreed on an 180,000-tonne wheat purchase. Corn futures were helped by investors returning to the market to seek cheap valuations. September wheat was trading at $6.7012 a bushel July 3, while September corn touched $5.3863.

In other agricultural commodities, robusta coffee futures this week moved up to their highest in almost three weeks on speculation prices had fallen too far and concern about declining stockpiles in Europe. Robusta coffee for September delivery on London-based NYSE Liffe touched $1,811 a tonne on Monday (July 1), the highest for a most-active contract since June 12. Robusta coffee prices, as with arabica prices, have been under pressure in recent weeks as a result of ample global supplies. Liffe robusta coffee hit 17-month lows in mid-June as favorable weather boosted supply prospects in the two robusta biggest producing countries, Vietnam and Indonesia.

Arabica coffee futures, meanwhile, were up again this week after recording a four-year low of $1.1717 a pound in the second half of June. September arabica on ICE Futures U.S. touched $1.2312 July 2, up from $1.1910 a week earlier.

Raw sugar futures were lower this week as supply concerns continued to weigh on markets. Raw sugar for delivery in October on ICE Futures U.S. slipped to 16.53 cents a pound July 2, down from the week-earlier six-week high of 17.48 cents. Cocoa futures both in New York and London, meanwhile, were higher this week, benefiting from technically-driven factors. September cocoa on ICE Futures U.S. rose to $2,217 a tonne and to £1,490 a tonne on Liffe in Wednesday (July 3) trading. Cotton futures at midweek remained off the three-week low touched on June 24, when the December contract on ICE Futures U.S. slumped to 83.11 cents a pound.

 While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author, Lynda Davies, can accept no responsibility for any errors or any consequence arising from the information provided.