U.S. oil futures slipped to $94 a barrel late this week after rallying and recording their biggest one-day gain in a month on Nov. 6.
The rally followed the U.S. Energy Information Administration’s (EIA) latest weekly report showing a smaller-than-expected climb in the country’s crude inventories as well as declines in U.S. gasoline and distillate stocks. The benchmark West Texas Intermediate (WTI) for December delivery rose $1.43 or 1.5 percent to settle at $94.80 a barrel on the New York Mercantile Exchange (Nymex). Prior to the release of the EIA’s latest oil report, the December WTI had been trading at $94.22 a barrel and some 42 cents below last week’s close at $94.64, a then-four-month low.
In midday trade on Nov. 7, however, the December WTI recorded a fresh four-month-low, touching $94 a barrel.
The EIA reported U.S. commercial crude inventories were up 1.6 million barrels to 385.4 million barrels for the week ended Nov. 1. The previous day, the industry group American Petroleum Institute (API) reported its own data, which indicated an 871,000-barrel increase in the country’s crude stocks.
Concern about increasing U.S. crude supplies and weakening demand in the world’s biggest oil consuming country have weighed on futures prices in recent weeks. The climb in U.S crude inventories last week marked the seventh week of increases and according to EIA data, crude stocks have risen by 29.8 million barrels since the week ending Sept. 13.
Brent North Sea crude futures also headed lower this week as Libya prepared to resume exports from two terminals. The European crude benchmark, Brent North Sea for December delivery, neared $103 a barrel in late trade on the London-based ICE Futures Europe exchange on Nov. 7, its lowest level in over four months. The December contract had settled at $105.24 a barrel the previous day, down from $106.23 a barrel at Nov. 4 close.
News agencies quoted a spokesperson for Libya’s state-run National Oil Corp. saying crude was scheduled to be loaded from the Mellitah export terminal earlier this week with exports likely to resume from Hariga port next week. Oil production in the country has dropped sharply recently amid widespread labor unrest and political protests.
December Brent had climbed to $110.16 a barrel on ICE Futures Europe on Oct. 30 amid the worries about plummeting oil shipments from Libya. It finished last week at $105.91 a barrel.
Crude prices may decrease further as the “intensity” of supply disruptions, which tightened the market in the third quarter, eases, Barclays warned in a report on Nov.1. The bank maintained its fourth quarter forecasts for Brent crude at $105 a barrel.
Two surveys released Nov. 1 showed China’s manufacturing sector strengthen further in October, providing some support for copper and other base metals prices. The HSBC/Markit Purchasing Manufacturers Index (PMI) rose to a seven-month high of 50.9, up from 50.2 in September, while China’s official PMI moved to an 18-month high of 51.4 in October. A value above 50 represents growth while under 50 indicates contraction.
Steady demand from leading consumer China provided general support for copper and other base metals prices in recent weeks.
Three-month copper prices on the London Metal Exchange (LME) fell to $7,093 a tonne at midweek on Nov. 7, the lowest since Oct.10 and near the bottom of the$7,000-to-$7,420-a-tonne range held in the past three months. The three-month metal had finished last week at $7,264 a tonne.
Standard Bank’s Head of Research, Walter de Wet, believes data from China continues to signal fairly strong growth. In the bank’s Nov. 5 Commodities Daily, he said the country’s economic growth now looks better than at the start of the year, and cited China’s electrical production as “growing apace,” with electricity production showing year-to-year growth of 8 percent for the nine months to Sept. 30, compared with the same prior-year period.
De Wet said that this, in the bank’s view, “flags improved industrial and manufacturing conditions in China.” However, he warned that especially for base metals, improved demand is likely to be overshadowed by strong supply.
Nevertheless, he said, the data provides “some confidence that one should not get too bearish on metals such as copper in the short-to medium term.”
Meanwhile, gold futures on the Comex division of Nymex at midweek rebounded from a three-week low as a weak U.S. dollar helped boost demand for the precious metal. The most active gold contract for December delivery rose $9.70 to settle at $1,317.80 an ounce on Nov. 6.
Cotton falls further on China demand slowdown
Among soft commodities, cotton prices fell to fresh 11-month lows as the market responded to fears that China is set to release cotton from its stockpile, which would curb the country’s need to import supplies of the raw fiber. China has been actively importing sizeable volumes of cotton since late 2011 in order to ensure a steady supply to the country’s mills, boosting global cotton supplies and prices.
Trade reports suggest that the state-owned China National Cotton Reserves Corp. that controls the country’s cotton reserve may start selling some of its estimated 10 million tonnes or so of cotton stocks before the end of this year or in 2014. The state-owned inventory is reported to have quintupled in the size since late 2011.
Cotton for delivery in December on the ICE Futures U.S. exchange slumped to 75.27 cents a pound on Nov.5, the lowest since mid-January, before clawing back to settle at 77.07 cents the next day. Traders said cotton moved higher midweek on speculation that futures had fallen too far, too fast.
December cotton closed last week at 76.56 cents a pound. In mid-August, the most-active cotton contract on ICE in New York reached a near 17-month high of 93.32 cents a pound on the back of increasing concern about the condition of the U.S. cotton crop.
Massive global supplies continue to take their toll on coffee prices, with arabica beans this week sinking to their lowest levels in seven years on ICE Futures U.S. Arabica coffee for delivery in December touched $1.0095 a pound on Nov. 7, the lowest point for the most actively traded contract since October 2006, before rebounding to $1.0335.
Arabica coffee futures prices have fallen by more than 30 percent this year to date as top grower Brazil brought in a second bumper crop. The latest slide has come amid big harvests from Colombia and Central America. The London-based industry trade association, the International Coffee Organisation (ICO), expects global supplies of arabica coffee to outpace demand by 4 million 60-kilogram bags in the coffee year that began Oct. 1.
Expectations of a record crop in Vietnam, the largest producer of robusta coffee, continue to push robusta prices down, with robusta futures on London-based NYSE Liffe trading at fresh three-and-a-half year lows this week. LIFFE robusta coffee for January delivery settled at $1,454 a tonne on Nov. 6, some 2.3 percent down on last week’s close at $1,489 a tonne.
The market early week shrugged off a tropical storm forecast to reach coffee-growing areas in southern Vietnam. After coming on land, the tropical depression weakened into a low pressure area and faded. However, Super Typhoon Haiyan, which is said to be the strongest typhoon in the last 10 years, at press time was moving into the East China Sea.
Vietnam’s harvest of its 2013-2014 (Oct. 1-Sept. 30) crop is well underway and is set to be a record. Analysts’ estimates of the crop range between 26 million and 30-million 60-kilogram bags, with the majority of these forecasts at between 26 and 28 million bags.
Vietnam Coffee and Cocoa Association deputy chairman Nguyen Nam Hai said in the Viêt Nam News that drought and diseases had seriously affected productivity and quality of coffee in plantation areas in the last year’s crop and the situation would continue with this year’s crop. According to the association, Vietnam’s 2012-2013 coffee crop decreased 15 percent compared to the previous year, while coffee exports from the 2012-2013 crop fell 11.2 percent in volume compared with the prior year with 1.4 million tonnes being exported.
Sugar prices continued to move lower this week amid speculation that Brazil and India, the two biggest producers, will increase sales as their currencies weakened against the U.S. dollar. ICE raw sugar futures powered to a one-year high on Oct. 18 after a fire destroyed nearly 180,000 tonnes of sugar in Brazil’s key sugar-exporting port, Santos. But concerns about disruption to supplies from the top exporter eased after the shiploaders and other sugar loading equipment at the affected terminal were found to be undamaged.
ICE March futures in New York touched 17.93 cents a pound, the lowest for a most-active contract since Sept. 30, in early trade on Nov. 7, before clawing back to 18.09 cents by midday. Immediately after news of the fire in Santos port, March raw sugar futures climbed to 20.16 cents a pound.
Refined, or white sugar futures were also lower this week, with December futures on NYSE Liffe in London settling at $480.15 a tonne on Nov. 6 .
While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author can accept no responsibility for any errors or any consequence arising from the information provided.
