Libya took center stage in the Brent crude market again as hopes were first raised and then dimmed about a restoration of Libyan oil exports.
Platinum prices may be on the threshold of moving up as strike-hit producers in South Africa mull sourcing metal on the spot market to meet contractual obligations.
Among soft commodities, U.S. cotton futures dropped sharply on higher-than-expected plantings in the top exporting country.
Brent crude prices first tumbled and then gained the most in a month last week as the market focused on Libyan oil supplies. The European benchmark tumbled to near a five-month low amid claims that a Libyan rebel group had agreed with the Libyan government to end its seizure of one of the country’s eastern oil ports.
The news raised hopes of an end to the eight-month blockade of the ports of Sidra, Zueitina and Ras Lanuf. As a result of the blockade and other rebel action, the country’s oil exports have fallen from 1.4 million barrels a day in July to around 230,000 barrels per day in March, according to Bloomberg data. However, by April 3, hopes of an imminent oil deal faded after news reports that the rebels’ executive office had denied reports a group would cede control of Zueitina.
Brent crude for May delivery on London’s ICE Futures Europe exchange gained $1.36 a barrel to settle at $106.15 on Apr. 3. A day earlier, Brent for May dropped as low as $104.13 a barrel — marking its weakest since Nov. 8 — before recovering some of the lost ground to settle at $104.79.
Brent largely ignored the unexpected drop in U.S. crude inventories last week, analysts said. U.S. commercial crude stocks fell 2.4 million barrels to 380.1 million in the week ending March 28, the country’s Energy Information Administration (EIA) reported April 2. This marked the first drop in U.S. crude inventory levels in nine weeks; a further stock build had been expected by the market. But crude stocks at the key Cushing, Oklahoma storage hub continued to fall – by a further 1.2 million barrels to 27.3 million last week, the government agency said.
However, while the EIA data showed a further drop in U.S. stocks of gasoline (down 1.6 million barrels), distillates stocks rose 0.6 million barrels in the week to March 28, although EIA noted stocks of the latter were at the lower end of the average range for this time of year.
U.S. crude futures on the New York Mercantile Exchange (Nymex) slipped below $100 a barrel again as the market worried about demand levels in the country. The benchmark West Texas Intermediate (WTI) for May delivery on the New York Mercantile Exchange (Nymex) settled at $99.62 a barrel on April 2, but managed to claw back some of the lost ground the following day, finishing at $100.29.
Platinum prices could be on the threshold of finally starting to move up in response to the 10-week mine strike over wages in South Africa. News this week could suggest that two of the affected producers are running low on the metal. According to news reports, Anglo American Platinum (Amplats) and Impala Platinum (Implats) are now considering sourcing platinum in the spot market to meet their contractual obligations, although this could not be confirmed by press time. Such a move could underpin spot prices going forward, analysts say. The third producer affected by the strike, Lonmin, did not say if it would seek to source platinum outside its own operations.
Platinum was trading lower than in the week before the strike began on Jan. 23 when it spiked up to $1,469.50 a tonne. Last week spot platinum was fixed at between $1,418 and $1,439 an ounce on the London market. Much of the muted response of platinum prices to the 10-week strike that cost the three producers $1.074 billion in lost revenues (as of April 4) lies in the fact the labor dispute was anticipated and producers and fabricators built up stocks ahead of the strike. That may be about to change.
Gold futures fell to a seven-week low early last week as signs of stronger U.S. economic activity and receding Russia-Ukraine worries diminished investor interest in the safe-haven appeal of the precious metal. Gold for June delivery fell $3.80 to $1,280 an ounce on Comex April 1. This was the lowest settlement for the most active contract since Feb. 10, when it closed at $1,274.70 an ounce.
Among the soft commodities, U.S. cotton futures fell sharply last week after the U.S. Department of Agriculture forecast higher-than-expected plantings this spring. USDA in its latest Prospective Plantings Report, released March 31, said it expects U.S. farmers to plant 7 percent more cotton in the 2014-2015 season (Aug. 1-July 31) than in 2013-2014, with planted area expected to total 11.1 million acres.
The benchmark May cotton contract on New York’s ICE Futures U.S. exchange slipped to settle at 90.98 cents a pound by April 3, some 2.76 cents down on the March 28 close at 93.74 cents. On March 26, May cotton hit a two-year high of 97.35 cents a pound amid concerns of tightening supplies in the U.S., the world’s largest cotton exporter.
The prospective increase in U.S. supplies is now weighing on the market amid a projected sharp increase in next season’s global inventories.
The Washington, D.C.-based International Cotton Advisory Committee in its monthly outlook released April 1 said it expected 2014-2015 global cotton ending stocks to reach 21.04 million tonnes, up from an estimated 8.72 million tonnes this season.
Cocoa futures continued to ease back from their recent two-and-a-half-year highs, with the market coming under pressure from favorable weather in the key West African region. Generally though the market remains well supported by expectations of another straight year of supply deficit.
May cocoa on London’s NYSE Liffe exchange settled at £1,849 a tonne on April 3, some £50 off last month’s two-and-a-half year peak. Meanwhile, ICE cocoa for delivery in the same month finished at $2,919.50. ICE cocoa had climbed above $3,000 a tonne for the first time in two-and-a-half years on March 11 to hit $3,027.
The market now is looking ahead to the latest round of grinding data, an indicator of demand for the key chocolate-making ingredient. European first-quarter grind data is due to be released this week by the European Cocoa Association in Brussels. Analysts expect the data to show at least a 3 percent increase year-on-year .
Raw sugar futures slipped this week amid easing concerns about the extent of the crop damage in Brazil due to record dry, hot conditions in the country’s southern areas in January and February. Recent rains in the key Center-South cane-growing areas have led analysts to believe the crop losses may not be as large as initially feared.
May raw sugar on ICE Futures U.S. settled at 17.03 cents a pound on April 2, down 0.75 cents on the March 31 finish. U.S. raw sugar futures rose to a four-month high of 18.47 cents on March 6 amid worries about the impact of the extreme dry, hot weather in the southern cane-growing areas.
Refined or white sugar futures also traded lower, settling at $453.55 a tonne on NYSE Liffe at midweek.
Arabica coffee futures too continued their retreat from the two-year highs reached in mid-March on the back of concern about the impact on output of drought damage to coffee trees in Southern Brazil’s key growing regions. The arrival of rain has helped alleviate some of those concerns and led to heavy selling pressure. However, the full impact of the extreme weather on next season’s arabica output will not be known until the harvest gets underway in May and June, analysts say.
May arabica coffee finished at 173.60 cents a pound on April 3 after touching 167.9 cents the previous day, the lowest since March 24. Second-position arabica futures climbed to their highest level since February 2012 on March 11, reaching 208.90 cents a pound. This represented a more-than 80-percent gain since the start of the year.
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