AfkInsider Commodities Report: Crude Falls; Cocoa & Sugar Up Again

AfkInsider Commodities Report: Crude Falls; Cocoa & Sugar Up Again

U.S. crude oil futures fell further this week, despite an initial gain following news of the U.S. bipartisan fiscal deal on a debt ceiling on Oct. 16, which averted a government default.

The U.S. crude benchmark, the West Texas Intermediate, for delivery in November on the New York Mercantile Exchange (Nymex) ticked up to $102.29 a barrel by close on Oct.16, after hitting an intraday low of $100.60 on Oct. 11. Until Oct. 17, this was the lowest intraday price seen since July 3.

But November West Texas Intermediate recorded a fresh intraday low on Oct. 17 at $100.06 a barrel, as of midday. The decline came after the U.S. industry group, the American Petroleum Institute (API) on Oct. 16 reported that crude inventories at the Cushing, Okla. hub, the delivery point for futures traded on Nymex, increased by 291,000 barrels last week.

Total U.S. commercial crude stocks have climbed 14.9 million barrels in the three weeks to Oct. 11, according to the U.S. government’s Energy Information Agency’s (EIA) Weekly Petroleum Status reports. The EIA attributed the inventory increases to lower demand from U.S. refineries as well as higher imports. The agency did not issue its weekly oil report this week due to the government shutdown.

The European benchmark, Brent North Sea crude, was also trading lower this week. Having powered up to finish at $111.80 a barrel on Oct. 10, largely on the back of market worries that political tensions in Libya would once again disrupt oil flows from the country, November Brent crude slipped to settle at $109.66 a barrel on ICE Futures Europe by Oct. 15, but clawed back $1.20 to finish at $110.86 a barrel the following day (when the contract expired) amid news of the U.S. fiscal deal. Brent crude for December delivery rose $1.17 a barrel to $110.59 by close. But like U.S. crude, Brent lost traction on Oct. 17 and was trading at $108.99 near finish.

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Having started the week at their weakest level since July 10, gold futures climbed back above $1,300 an ounce as talk of U.S. debt downgrades re-kindled the precious metal’s “safe-haven” appeal. December gold on the Comex division of Nymex was trading at $1,321.60 at midday on Oct. 17. On Oct. 11, December gold had settled at $1,259.60 an ounce.

Cocoa climbs again on positive demand data

Cocoa futures powered higher again this week after bean processing in Asia in the third quarter jumped by 12.1 percent, providing a further signal of rising demand for the chocolate-making commodity. Futures prices had initially stalled early in the week following weak grind data from Malaysia, Asia’s largest cocoa grinder.

Cocoa for December delivery rose to $2,772 a tonne on the ICE Futures U.S. exchange in New York on Oct. 17, the highest for a most-active contract since mid-September 2011.  December cocoa on NYSE Liffe in London climbed to £1,777 a tonne, the highest level for a second-position contract since October 2011.

December cocoa on the ICE Futures U.S. had slipped to $2,714 a tonne and cocoa for December delivery on Liffe fell to £1,756 a tonne after the Malaysian Cocoa Board reported Malaysia had seen a 3.1 percent decline in cocoa processing volumes to 71,150 tonnes in the July-September period from a year ago and the third quarterly decline in a row. The figure took the total volume of beans processed by Malaysia in the first nine months of the year to 215,544 tonnes, also down 3.1 percent year-on-year.

The Singapore-based Cocoa Association of Asia said the region’s cocoa grind reached 161,097 tonnes in the quarter ended Sept. 30, representing a 12.1-percent increase on the same year-earlier quarter.

Last week, the Brussels-based European Cocoa Association reported a 4.7 percent rise in third-quarter European cocoa grind compared with the same year-earlier period. The positive European processing data helped take cocoa futures in London to fresh two-year highs and in New York to their strongest in 23 months.

The market is now looking to North American third-quarter data, due out this week, and to Asian data for the same period (release data yet to be scheduled) to provide further pointers about demand.

Raw sugar futures touched seven-month highs at the start of this week, boosted by further short-covering by the market as wet conditions continue to hamper the cane harvest in top producer Brazil.

Raw sugar for delivery in December on ICE Futures U.S. touched 19.11 cents a pound on Oct. 14, its strongest price in seven months, before settling at 19.05 cents. By close at midweek, the front-month contract was a tad lower, at 19.03 cents a pound. ICE raw sugar futures currently are trading almost 20 percent up on a three-year low of 15.93 cents recorded in mid-July.

White, or refined, sugar futures in London traded just off the three-month high set last week, when the December contract on NYSE Liffe rallied to $508.90 a tonne on Oct. 10. December settled at $507.20 a tonne on Oct. 16, 90 cents down on the week so far.

Sugar markets shrugged off Cyclone Phailin that hit India’s east coast of Odisha and Andhra Pradesh on Oct.13, leaving a trail of destruction across coastal areas. In a Press Trust of India statement on Oct.14, the country’s Food Minister K. V. Thomas said of India’s sugar production, that output is expected to be 25 million tonnes in the 2013-2014 marketing year, against the demand of 22 million tonnes. India’s government projections on sugar output are in line with those of the industry.

Arabica coffee futures edged up this week, supported by short covering as the market looked to potential heavy rains in key-growing regions in leading producer and exporter Brazil and which could impact the development and the flowering of the coffee crop. ICE December arabica coffee futures reached $1.1585 a pound by close on Oct. 16, a 1.3 percent gain on its week-earlier level. Front-month arabica had slipped to $1.1105, a more than four-year low on Sep. 17, pressured by a huge off-year harvest in top producer Brazil.

Robusta coffee futures were trading lower as the market anticipates the upcoming shipments of beans from leading grower Vietnam. A record crop is expected this coffee year, adding to already ample global supplies. By close on Oct. 16, November robusta settled at $1,655 a tonne on NYSE Liffe, $81 a tonne down on a week earlier.

Cotton futures also ticked higher this week as the recent price dips to the 83-84 cents-a-pound level resparked some buying in a market dogged by competition from synthetic fibers and high prices. On the other hand, continued investor uncertainty and the arrival of the Northern Hemisphere’s harvest is adding seasonal pressure to cotton futures.

The most-active December cotton contract on ICE Futures U.S. edged up to settle at 83.71 cents a pound on Oct.15, 0.61 cents or 0.7 percent up on the one-month low of 83.10 seen on Oct.9.  But December cotton had eased back to close lower at 83.16 cents a pound by Oct. 16.

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.