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AfkInsider Commodities Report: Oil Climbs On Egypt Concerns

AfkInsider Commodities Report: Oil Climbs On Egypt Concerns

Escalating violence in Egypt, which has renewed concerns about supply disruptions, became the focus of international oil market attention on Aug. 15 after clashes between the Egyptian security forces and supporters of the former Islamist President Mohamed Morsi left more than 500 dead, according to news agency reports.

The latest economic and other data from China have provided mildly positive input for some commodity markets over the past week, particularly for base and precious metals as well as oil.

The international benchmark Brent North Sea crude, based on the September contract, touched $110.03 a barrel on Aug. 15 before easing back to $109.52 in late trade, still up $1.30 on its Aug. 9 close of $108.22. Traders fear the unrest in the North African country could hit shipments through the Suez Canal and Sumed Pipeline. Both are strategic routes for Persian Gulf oil and gas shipments to Europe and North America. The Suez Canal and Sumed Pipeline carried an estimated 3.8 million barrels of crude and oil products a day in 2011, according to the U.S. Energy Informational Administration (EIA).

On Aug. 9 Brent crude added 75 cents after five days of losses on the mildly positive Chinese economic data and record high crude oil imports by China in the first half of this year. China is the world’s second biggest oil consumer.


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Oil prices also gained support from a further decline in U.S. crude stockpiles. On Aug. 14, the U.S. Energy Information Administration reported inventories shrank 2.8 million barrels to 360.5 million barrels for the week ending Aug. 9. U.S. gasoline stocks fell 1.2 million barrels to 222.4 million barrels.

In New York, the U.S. benchmark West Texas Intermediate for September was trading at $107.46 a barrel at midday on Aug. 15, some 1.49 cents a barrel higher than its Aug. 9 close of $105.97.

Copper held on to its gains this week although other base metals lost steam after last week’s rally, pressured mainly by a strong U.S. dollar. Three-month copper on the London Metal Exchange was at $7,309 a tonne in late trade on Aug. 15, $33 a tonne higher than its Aug. 9 close. Copper and other base metals had responded positively to the latest, mostly upbeat data from China as well as strong export figures for the country in July reported the previous day.  By close on Aug. 9, three-month LME copper reached $7,276 a tonne from $7,063 a week earlier.

China’s National Bureau of Statistics on Aug. 9 showed the country’s industry production grew at its fastest rate since February, rising 9.7 percent from a year earlier and up from 8.9 percent in June.  While retail-sales growth slowed slightly, other data released indicated growth.  Data released the previous day showed China’s imports and exports unexpectedly jumped in July, another positive sign for the Chinese economy. Some analysts, however, remain cautious about China’s prospects, believing the country’s economy continues to face some serious challenges. China accounts for around 40 percent of global copper demand and is also a big consumer of other base metals.

Gold edged up over the past week, supported by strong demand from China, the world’s second biggest consumer of the precious metal, as well as better-than-expected economic data from the country. The China Gold Association said in an Aug. 12 statement on its website that the country’s purchases of gold rose 53.7 percent or 246.78 tonnes to 706.36 tonnes in the first half of 2013 compared with the same year-earlier period, as lower prices for the precious metal attracted buyers.  On current data, China this year looks set to overtake India as the leading consumer of gold.  China’s gold consumption in 2012 reached 832.18 tonnes.

Gold for December delivery on the Comex division of the New York Mercantile Exchange (Nymex) was $1,364 an ounce in midday trade on Aug. 15, up $51.80 an ounce on Aug. 9’s close at $1,312.20 an ounce.

Platinum and sister metal palladium continue to hold up. Platinum for October delivery on the Comex division of Nymex was trading at $1,532.60 an ounce at midday on Aug. 15, a gain of $32 an ounce from Aug. 9’s close of $1,500.60 an ounce. Palladium for September delivery was up at $759.50 an ounce at midday against Aug. 9’s close of $741.

Raw sugar climbed to a six-week high on Aug. 13 amid further indications that Brazil, the largest producer and exporter, is favoring ethanol production over the sweetener. Millers in the center-south, the country’s main sugar-producing region, consumed 55.03 percent of the sugar cane processed in the second half of July to make ethanol, up from 49.41 percent in the same year-earlier period, Brazil’s sugarcane industry association, Unica, reported on Aug. 9.  The center-south processed 44.26 million tonnes of cane in the second half of July, 4.35 percent less than a year earlier.

Raw sugar for delivery in October on ICE Futures U.S. climbed to 17.29 cents a pound on Aug.13, the highest for the front month since June 25, and more than 8 percent above the three-year low of 15.43 cents seen in mid July. Sugar prices started to ease back at midweek, however, as a further weakening of the country’s real led to concerns that Brazilian producers would boost their sales again. October raw sugar fell to 17.21 cents a pound by midday on Aug. 15 on ICE Futures U.S., but was still 37 cents up on its Aug. 9 close of 16.84 cents a pound.

October white sugar on London’s NYSE Liffe continued to edge higher this week, settling at $504.40 a tonne on Aug. 15.

Cocoa futures prices, meanwhile, remain supported by buying amid worries about dry weather in leading producing country Côte d’Ivoire. Cocoa reached 11-month highs in London and eight-month highs in New York trading on Aug. 8. The December contract on London’s NYSE Liffe climbed to £1,671 a tonne, the highest for the second contract since September 2012, while cocoa for delivery in December on ICE Futures U.S. hit $2,525 a tonne. But origin selling by Côte d’Ivoire as well as Ghana is helping to keep a lid on prices, according to traders. December cocoa  in London was down to £1,653 a tonne in late trading on Aug. 15 while December cocoa on ICE Futures was at $2.476.50 a tonne at midday.

Following last week’s boost as the Brazilian government moved to support farmers’ incomes, arabica futures prices found further support this week after the country’s Parana state reported that some 62 percent of its coffee crop for harvest next year would be lost due to frost damage in late July. According to a Reuters report, this would mean a loss of some 1 million 60-kilogram bags, small in terms of Brazil’s total output. Nevertheless, it prompted some short covering. Arabica futures for December delivery on ICE Futures U.S. moved up on the news to close 2.3 cents higher at $1.253 a pound on Aug. 14. September arabica prices had slumped to a four-year low of $1.1547 a pound on Aug. 1.

Robusta coffee futures on London’s NYSE Liffe were largely unchanged, with November up $18 at $1,926 a tonne in late trade on Aug. 15. This compares with Aug. 9’s close at $1,928.

Among other soft commodities, cotton futures moved above 92 cents a pound on Aug 14 for only the second time in almost five months based on the December contract, after the U.S. Department of Agriculture cut its forecast for the domestic crop. Cotton subsequently eased back to 91.64 cents in late morning trade on Aug. 15.

 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.