U.S. crude oil futures this week closed above $100 a barrel for the first time this year, and reached their highest level in four months at midweek. The benchmark West Texas Intermediate (WTI) for March delivery on the New York Mercantile Exchange (Nymex) settled at $100.37 a barrel on Feb. 12, its highest close since mid-October, after government data showed a big drop in stockpiles at the key Cushing, Oklahoma storage hub.
Cushing is the delivery point for the Nymex futures contract. Futures were also boosted by a further decline in the U.S. inventories of distillates, including heating oil and diesel, and of gasoline.
The U.S. Energy Information Administration (EIA) in its latest weekly oil report said crude inventories at Cushing fell to their lowest in three months during the week ending Feb 7. The 2.7-million barrel draw-down to 37.6 million barrels was the biggest weekly decline since last July.
Much of the draw-down is attributed to the start of commercial operations on Jan. 22 of TransCanada Corp.’s Gulf Coast pipeline that runs to Nederland, Texas, from Cushing. TransCanada is projecting the new 780-kilometer pipeline to have capacity to transport 520,000 barrels per day of crude from Cushing to Gulf refineries during its first year of operation.
The EIA also reported a 0.7 million barrels decline in U.S. distillate fuel inventories for the week ending Feb. 7 and noted the stocks were “well below the lower limit of the average range for this time of year”. Total motor gasoline stocks were also down by 1.9 million barrels in the same week.
However, an overall climb in U.S. commercial crude inventories for the week limited futures gains. According to EIA data, the country’s crude stocks rose 3.3 million barrels to 361.4 million. The inventory gain prompted some analysts to question whether the crude moving out of Cushing to the Gulf would be consumed by refiners or simply see the oil stocks relocated.
North Sea Brent oil was also higher by midweek, after the Vienna, Austria-headquartered Organization of the Petroleum Exporting Countries (OPEC) said it expects world oil demand to rise slightly more than it previously expected. The organisation in its latest monthly report said global oil demand will rise by 1.09 million barrels a day in 2014 to reach 90.98 million barrels, up by 45,000 barrels from its previous forecast.
OPEC was the second oil organisation this week to revise upwards it forecast of demand growth in 2014. Earlier in the week, the U.S.’ EIA raised its world oil demand forecast for this year by 1.26 million barrels a day, 50,000 barrels higher than its earlier forecast.
Brent North Sea crude for April delivery pushed up over $109 a barrel on London’s ICE Futures Europe exchange on Feb. 12, before closing at $108.35. A week ago, April Brent had been trading around $106 a barrel.
Crude prices were also boosted by the latest Chinese customs data that showed the world’s second biggest economy imported record volumes of crude oil in January. China imported 6.63 million barrels of crude last month, 11.9 percent more than in January 2013, according to the country’s General Administration of Customs.
No end in sight for South African platinum strike
Talks aimed at ending the strike by South African platinum mine workers, which is now in its fourth week, were to resume on Feb. 13. The country’s Commission for Conciliation, Mediation and Arbitration (CCMA) first will hold talks with the three producers affected by the labour action, Anglo American Platinum (Amplats), Lonmin, and Impala Platinum (Implats). Separate talks between the commission and the Association of Mineworkers and Construction Union (Amcu) are planned to follow.
Wage negotiations broke down between the three producers and Amcu on Feb. 6 on account of the two parties being unable to reach a settlement. Over 80,000 workers have downed tools since the strike began on Jan. 23. The protest led to its first death last weekend, when an Amplats worker was killed outside the company’s Rustenberg mine in Limpopo province on Feb. 7. An investigation has yet to establish whether the police who were trying to disperse protestors or the mines’ private security firm were responsible for the man’s death. Another worker was seriously assaulted earlier this week on his way to Amplats’ Khuseleka mine.
The South African rand platinum price hit a 5⅟2-year high of R16,178 an ounce in late January. It has since eased back but remains around 8 percent up on the year. The dollar platinum price, however, has been largely unmoved by the strike, mainly because the three producers have stockpiled reserves.
“Platinum and palladium are still ignoring the strikes in South Africa,” said Walter de Wet, Commodities Strategist at Standard Bank, in the bank’s Daily Global Commodities report early this week “We believe the market remains well-supplied.”
The bank’s estimates of above-ground inventories for both metals are “well-above” market consensus, he said.
Dollar-denominated spot platinum currently is only about 1.4 percent up on the year, standing at $1,403 an ounce in Feb. 12’s London pm fix. Platinum futures for April on the Comex division of Nymex finished at $1,407.30 an ounce at midweek. Spot sister metal, palladium, meanwhile was $722 an ounce on Feb. 11 while palladium futures for March delivery on Comex closed at $729.05 an ounce.
Gold, meanwhile, climbed to a three-month high after the U.S. Federal Reserve’s new chair, Janet Yellen, told the U.S. House Financial Services Committee on Feb. 11 that she had no plans to make any abrupt changes to the central bank’s policy of a measured tapering of bond purchases, as laid out by her predecessor Ben Bernake.
Spot gold hit $1,293.44 an ounce in London’s afternoon fix following Yellen’s comments, its highest point since mid-November. U.S. gold futures for April delivery settled the day $15.10 up at $1,289.80 an ounce on Comex.
Meanwhile, among soft commodities, sugar prices eased back after climbing to 4⅟2-week highs last week amid weather worries in top exporting country Brazil. Much needed rains are now forecast for the country’s south which has seen more than six weeks of soaring temperatures and drought. The extreme weather had sparked fears of crop damage in the country’s key-growing regions.
Sugar was also pressured early week by expectations that India shortly would announce a subsidy to back exports of the sweetener. The subsidy potentially would cover exports of as much as 4 million tonnes and is designed to ease a domestic glut of the sweetener. These additional volumes from India, which is the world’s second biggest sugar exporter, would bring to bear yet further pressure on a market already weighed down by burgeoning global supplied.
However, India’s Cabinet Committee on Economic Affairs (CCEA) on Feb. 12 postponed the decision on the export subsidy amid unresolved differences between the Agriculture and Food ministries about the level of subsidy. This marks the third time a decision has been deferred.
March raw sugar on New York’s ICE Futures U.S. exchange settled at 15.89 cents a pound on Feb. 12. The front-month contract had risen to a 4⅟2-week peak of 16.38 cents a pound on Feb. 4. Refined, or white, sugar on London-based NYSE Liffe for May delivery finished at $446.50 a tonne midweek.
Coffee futures also turned weaker this week amid the forecast of rain in Brazil. After soaring to a nine-month high of 144.03 cents a pound on ICE Futures U.S. on Feb. 6, arabica for March delivery settled 2.5 cents lower at 141.53 cents on Feb. 12. Robusta coffee on London’s NYSE Liffe exchange also traded lower this week, with the March contract closing at $1,823 a tonne at midweek after touching five-month peaks of $1,879 a tonne last week.
Concern that more dry weather across West Africa’s cocoa-growing regions could increase the stress of cocoa trees in what already is the dry season pushed cocoa futures up to a 29-month high in New York on Feb. 12. The worries about supply comes at a time of strong demand for the key chocolate-making ingredient. World cocoa supplies are expected to fall short of demand by around 70,000 tonnes this season (Oct. 1-Sept. 30), according to the International Cocoa Organization.
Cocoa for delivery in May on ICE Futures U.S. climbed to $2,968 a tonne on Feb. 12 before settling at $2,962.50. Meanwhile, Liffe March cocoa in London finished at £1,870 a tonne, up from £1,853 a week ago.
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.
