Brent and WTI crude oil futures fell to four and three-year lows respectively as OPEC cut its forecast for the call on its crude next year; gold clawed back losses from the 4⅟2-year low recorded last week but remains in negative territory. Among soft commodities, ICE raw sugar made strong gains on short-covering while arabica coffee was also higher on a global deficit forecast from the International Coffee Organization
Oil prices tumbled further this week, with Brent North Sea crude on Nov. 12 sinking below $80 a barrel for the first time since October 2010. The U.S. benchmark, the West Texas Intermediate (WTI), which trades on the New York Mercantile Exchange (Nymex), is now approaching $76 a barrel.
Crude oil futures prices have lost around 30 percent of their value since hitting nine-months highs in June as ISIS-led militants advanced on swathes of northern Iraq, triggering concerns that oil supply from the country could be disrupted.
This week, Brent crude for December delivery on the London-based ICE Futures Europe exchange fell to $79.72 a barrel on Nov. 12 before trimming losses to settle at $80.38 a barrel, $1.29 down on the day.
The December contract, which expires on Nov. 13, ended last week at $83.39. Nymex’s WTI for December fell to an intra-session low of $76.44 a barrel on Nov. 11 before paring losses to settle at $77.94. By close at midweek, December WTI had shed a further 76 cents to finish at $77.18 a barrel, marking the lowest settlement since October 2011.
The latest slide in crude prices came after OPEC said demand for its crude oil next year is expected to fall to an average level of 29.2 million barrels a day, down from an estimated 29.5 million barrels this year.
The 2015 demand estimate is some 1 million barrels a day less than OPEC is currently pumping. According to the organization’s monthly oil market report, released Nov. 12, OPEC crude oil production averaged 30.25 million barrels in October, down 0.23 million barrels from September’s 30.48 million.
The U.S. Energy Information Administration (EIA) is also expecting global oil markets to be “looser” than previously projected, as global oil supply outpaces consumption by “a larger amount”. In its latest Short-Term Energy Outlook, EIA revised upwards its global supply forecast by 0.2 million barrels a day to average 92.9 million barrels a day in 2015, on account mostly, it said, of a smaller decline in Saudi Arabia’s production than it forecast in October.
The energy body also revised downwards its global demand forecast by 0.2 million barrels a day to average 92.5 million barrels a day in 2015, citing weaker global economic growth prospects for next year.
A public statement by Saudi Oil Minister, Ali al-Naimi, this week did little to help the price slide. The statement was the first since the price tumble began. The minister essentially re-iterated Saudi Arabia’s long-standing policy of seeking stable global markets and dismissed market talk of “an OPEC price war” [in order to maintain market share].
According to media reports, al-Naimi said little as to what the oil exporting group will do to halt the price fall. OPEC members are scheduled to meet in Vienna on Nov. 27 for their next production meeting. However, many market watchers believe it is unlikely that an agreement will be reached at the meeting to cut output.
Gold initially was firmer after prices of the precious metal dipped to a 4⅟2-year low late last week. Traders said a fall in the U.S. dollar against other major currencies and some pick-up in physical demand had helped.
However, a stronger U.S. started pulling prices of the precious metal down again by midweek. Benchmark December gold on the Comex division of Nymex settled $3.2 up at $1,163 a troy ounce on Nov. 11 but was $3.9 lower at $1,159.1 at settlement the following day.
On Nov. 7, December Comex gold had tumbled to $1,130.4 – its lowest since April 2010 – before making sharp gains to close at $1,169.8 an ounce, but still some $27 down on the day.
Gold has had a rough ride in recent weeks on increasing optimism about the strength of the U.S. economy which has boosted the U.S dollar and dampened the safe-haven appeal of the precious metal for investors.
Sugar rises but ISO says price outlook still bearish
Raw sugar on the ICE Futures U.S. exchange made strong gains early this week on short-covering. The London-based International Sugar Organization (ISO) on Nov. 12 projected a global sugar deficit of about 2.0-to-2.5 million tonnes in 2015-2016, but remains bearish in its price outlook.
March raw sugar futures rose 0.13 cents to settle at 16.36 cent a pound on Nov. 12, extending the previous day’s gain of 0.57 cents. ICE March raw sugar had finished last week at 15.69 cents a pound after dipping to 15.42 cents the day before, marking the front-month contract’s lowest level since Sept. 29.
The ISO reduced its estimate for the global “statistical” sugar surplus for the current sugar year (Oct. 1, 2014-Sept. 30, 2015) to 473,000 tonnes in its latest Quarterly Market Outlook published on Nov. 12. The industry organization expects 2014-2015 global output to remain flat at 182.9 million tonnes, raw sugar value, and world consumption to grow by 1.95 percent to 182.4 million tonnes in 2014-2015.
But it warned that “practically equal global production and consumption are not expected to provide relief to the huge global stocks accumulated over the past four seasons”.
Furthermore, while the ISO currently is projecting a global sugar deficit of between 2-to-2.5 million tonnes in 2015-2016, assuming normal weather conditions in the coming 21 months, the organization warned that “during the first ‘neutral’ season any bullish pressure of a looming deficit is expected to be mitigated by high stocks”. Consequently, “major upward price corrections would be unlikely,” it said.
