AFKInsider Commodities Report: U.S. Oil Prices Lowest Since May

AFKInsider Commodities Report: U.S. Oil Prices Lowest Since May

Concerns over growing crude supplies and high domestic production continue to take their toll on U.S. oil prices, which fell to their lowest level since the end of May early this week.

The U.S. benchmark, West Texas Intermediate (WTI), for December delivery on the New York Mercantile Exchange (Nymex) tumbled to $93.04 a barrel by close on Nov. 12, falling $2.10 on the previous day’s finish. The U.S. light, sweet crude contract, which had slipped to $94 a barrel late last week, is now down more than 16 percent on the two-year high reached in early September on the back of tensions surrounding a potential military strike on Syria by the U.S.

The U.S. Energy Information Administration  (EIA) in its weekly crude oil report, released Nov. 14 – a day later than usual – showed another increase in the country’s crude inventories last week, the eighth straight week of increases. The EIA said U.S. commercial crude stocks increased 2.6 million barrels to 388.10 million barrels for the week ending Nov. 8. In its own report, industry group American Petroleum Institute (API), this week reported inventories at Cushing, Okla., the delivery point for WTI futures, rose 1.67 million barrels last week. In early afternoon trade on Nov. 14, December WTI was trading at $93.62 a barrel.

In contrast, Brent North Sea crude on ICE Futures Europe moved back above $108 a barrel late this week, supported by Libyan supply outages and a warning from the International Energy Agency (IEA) of likely rising prices. Early in the week, the stalled weekend negotiations between Iran and Western countries over Iran’s nuclear aspirations had also provided a fillip for Brent. Discussions between six Western countries and Iran failed to produce an agreement that could ease sanctions on Iran’s crude exports. The negotiations are scheduled to resume later this month.

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In late trade on Nov. 14, Brent North Sea for January delivery was trading at $108.86 a barrel on the London-based ICE Futures Europe exchange.

Copper tumbled to its lowest level in three months at midweek amid renewed speculation the U.S. Federal Reserve will start reducing its monetary stimulus package earlier than previously expected as well as a lack of clear signals from a Chinese policy meeting.

China’s Third Plenum, a four-day meeting of the country’s top Communist officials to discuss the economic framework for the country over the next 10 years, ended on Nov. 12 with the leaders pledging to let markets play a “decisive” role in the economy. However, they provided few details in a vaguely-worded statement issued at the end of the four-day session. China is the world’s top consumer of copper, accounting for around 40 percent of  demand for the refined metal.

Three-month copper on the London Metal Exchange (LME) touched $6,961.25 a tonne on Nov. 13, its lowest point in three months, before settling at $7,021.50 a tonne. The move pushed the red metal through the floor of a $7,000 to $7,420 range it had held since early August.

Gold continued to slip during the first half of this week after dropping to less than $1,300 an ounce on Nov. 8. This followed better-than-expected U.S. jobs data that re-ignited expectations the Federal Reserve could start to taper its bond-buying program as early as next month. The most-active gold contract for December delivery settled at $1,260.89 an ounce on the Comex division of Nymex on Nov. 12, its lowest finish since Oct. 15.

The precious metal rallied a tad at midweek after the nominee for U.S. Federal Reserve chairman, Janet Yellen, hinted the central bank would continue with monetary stimulus measures. Having closed at $1,268.40 on Comex on Nov. 13, December gold was trading at $1,289.10 an ounce in early afternoon trade the following day.

However, analysts warned that prices are likely to test further lows amid fresh uncertainty over the Fed policy on U.S. stimulus measures. Gold prices already are down around 25 percent on where they began the year.

Cotton ticks up on adverse U.S. weather

Cotton futures prices ticked up as adverse weather conditions in the key cotton-growing states in the U.S. delayed the pace of the harvest. Cotton prices last week had touched fresh 11-month lows on concerns about possible reduced import buying from top consumer China.

The December cotton contract on the ICE Futures U.S. exchange touched 78.48 cents a pound on Nov. 12, the strongest level since Nov. 6, before settling at 77.88 a pound. The contract recorded a marginally higher settlement the following day at 77.97 cents. December cotton had slumped to 75.27 cents a pound on Nov.5, the lowest since mid-January.

Some 56 percent of the U.S. cotton harvest was completed as of Nov. 10, the U.S. Department of Agriculture (USDA) reported on Nov. 12. This was below the five-year average of 66 percent and compares to the 73 percent harvested in the same week a year earlier, the USDA data indicated.

The U.S. department raised its forecast for global cotton inventories for the 2013-2014 crop year to a fresh record high of 95.71 million bales last week, citing higher supplies in India and the U.S.

Refined, or white, sugar prices fell to a more-than three-year low in London, pressured by weak demand and ample supplies. December refined sugar on NYSE Liffe dropped to $457.30 a tonne at midweek, before moving up a tad to settle at $457.50 a tonne.

Raw sugar futures, meanwhile, dropped to a six-week low, pressured by the Brazilian harvest and weaker real. The March contract on ICE Futures U.S. closed at 17.80 cents a pound after touching a six-week low of 17.79 cents on Nov 12. March raw sugar finished marginally higher the following day at 17.84 cents a pound.

In its latest Quarterly Market Outlook released Nov. 14, the International Sugar Organization (ISO) warned that although prices have shown relative strength in the past three months, “the global fundamentals provide little support to the market during the remaining 10 months of the 2013-2014 season.”

“Crucially, any price recovery on the back of a projected deficit in the next season might be muted by the huge stocks accumulated since the beginning of the surplus phase in 2011-2012,” the trade group said.

ISO currently forecasts global sugar stocks to reach 75.837 million tonnes (raw value) at the end of 2013-2014 (Oct. 1-Sept. 30), a 0.85-percent or 642,000-tonne increase on 2012-2013 estimated ending stocks of 75.195 million tonnes.

Robusta coffee, meanwhile, dropped to the lowest level in almost a week in London amid speculation that farmers in leading producer Vietnam will begin selling as the harvest advances. Vietnam – and its main coffee-growing areas in the south – escaped the worst of Typhoon Haiyan which left thousands dead and widespread devastation in he Philippines. Haiyan made landfall in Vietnam’s northern province of Quang Ninh early morning Nov. 11, significantly weakened as a tropical storm. January robusta on London’s NYSE LIffe touched $1,446 a tonne in trading on Nov. 14, after closing the previous day at $1,465 a tonne.

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.