Commodity markets slide amid Iran nuclear deal

December 01, 2013

Global Commodity Markets
Global Commodity Markets

Commodities mostly fell this week as traders reacted to geopolitical events in the Middle East, and particularly Iran’s breakthrough nuclear deal with world powers. Markets also ended the week on a subdued note amid Thursday’s Thanksgiving holiday in the United States.

OIL: World oil prices slid on Monday after a US-led deal was struck between world powers and Iran over the Islamic Republic’s controversial nuclear programme. Brent North Sea crude shed more than $2 at one stage after major oil producer Iran agreed last Sunday to curb its nuclear programme for the next six months in exchange for limited sanctions relief.

The preliminary accord with world powers was expected to lay the foundations for a comprehensive agreement later this year. “What we see … is a downward correction of prices after the deal,” said Victor Shum of IHS Purvin and Gertz consultants. “The impact of the deal on global oil supply will however be limited since much of the sanctions continue to remain in place,” he told AFP. The deal was reached following marathon talks in Geneva between Iran and the so-called P5+1 nations comprising the United States, China, France, Britain, Russia and Germany.

The West and Israel suspect Iran is pursuing a nuclear weapons capability alongside its uranium enrichment programme, which Tehran insists is for peaceful purposes. The oil market rebounded slightly on Wednesday after official data revealed a smaller-than-expected increase for US commercial crude inventories, indicating soft demand in the world’s biggest economy. The Department of Energy said that US crude inventories grew by 1.6 million barrels last week, less than expectations for a rise of 1.9 million barrels.

Oil prices remain pressured by the sustained rise in official crude stockpiles over the past 10 weeks. Elsewhere, concerns over escalating political strife in Libya – a member of the Opec oil producing cartel – continued to drive European benchmark Brent crude. Four soldiers and at least 10 people were killed Thursday during violence in the North African state in the aftermath of a three-day strike in protest over militias.

By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in January firmed to $110.93 a barrel from $110.33 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for January sank to $93.58 a barrel from $94.69.

PRECIOUS METALS: Gold slid on Monday to its lowest point for four and a half months, as investors shunned the safe-haven metal amid easing concerns over Iran. “Gold temporarily dipped to a 4.5-month low of $1,225 per troy ounce as the new week of trading got underway,” Commerzbank analysts said. “This is doubtless due first and foremost to reduced geopolitical risks following a breakthrough in the nuclear talks between the West and Iran.”

By late Friday on the London Bullion Market, the price of gold rose to $1,253 an ounce from $1,246.25 a week earlier. Silver held steady at $19.93 an ounce. On the London Platinum and Palladium Market, platinum slipped to $1,376 an ounce from $1,396. Palladium increased to $724 an ounce from $721.

BASE METALS: Industrial metals followed oil lower after the Iranian deal, and amid the Thanksgiving break. “Ahead of the US Thanksgiving holiday on Thursday, the base metals markets have been quiet, with participants happy to sit on the sidelines,” said Standard Bank analyst Leon Westgate.

“As a consequence, turnover has been pretty subdued, while prices have also tended to edge sideways with the metals trading in fairly limited intraday ranges.” By Friday on the London Metal Exchange, copper for delivery in three months dipped to $7,068 a tonne from $7,077.77 a week earlier.

— Three-month aluminium reversed to $1,763 a tonne from $1,793.

— Three-month lead slid to $2,086 a tonne from $2,108.

— Three-month tin dipped to $22,760 a tonne from $22,845.

— Three-month nickel dropped to $13,501 a tonne from $13,560.

— Three-month zinc fell to $1,883 a tonne from $1,909.50.

COCOA: Prices stabilised as traders paused for breath following bumper gains the previous week. “Prices have been evenly balanced by the strong start to the West African harvest on the one hand, and signs of a rebound in demand on the other,” Ecobank analysts said. Cocoa futures had last week scored the highest points since September 2011 on tight supplies of the raw material that is mainly used to make chocolate. By Friday on Liffe, London’s futures exchange, cocoa for delivery in March eased to £1,750 a tonne from £1,758 a week earlier. On ICE Futures US, cocoa for March firmed to $2,789 a tonne from $2,784 a week earlier.

COFFEE: The market experienced mixed fortunes in subdued trading conditions. Prices recently hit multi-year low points that were triggered by the prospect of sizeable harvests in key producer nations Brazil, Colombia and Vietnam. By Friday on the ICE Futures US exchange in New York, Arabica for delivery in March dipped to 108.20 US cents a pound from 111.70 cents a week earlier. On Liffe, Robusta for January rose to $1,614 a tonne from $1,608 a week earlier.

SUGAR: Prices slipped as the market was hit once again by the prospect of another large surplus. “Prices fell back as concerns returned over the fourth consecutive global surplus of over 4.0 million tonnes forecast in 2013/2014,” said Ecobank analysts.

“Although the forecast fall in global production in 2014/2015 will give some price support going forward, for the time being prices will remain weak.” The London-based International Sugar Organisation predicted earlier this month that global sugar production would exceed demand by 4.73 million tonnes in 2013/2014. That was greater than the prior estimate of 4.502 million tonnes. By Friday on the ICE Futures US exchange, the price of unrefined sugar for delivery in March dropped to 17.23 US cents a pound from 17.44 cents a week earlier. On Liffe, the price of a tonne of white sugar for March nudged lower to $459.80 from $466 a week earlier.

GRAINS AND SOYA: Soya continued to climb on strong global demand and limited supplies, but maize and wheat held steady, traders said. By Friday on the Chicago Board of Trade, January-dated soyabean meal – used in animal feed – jumped to $13.37 a bushel from $13.19 a week earlier. Maize for delivery in December eased to $4.132 per bushel from $4.225. Wheat for December firmed to $6.51 a bushel from $6.50.

RUBBER: Prices dipped on news of weakening consumer confidence in the United States and expectations that a global rubber surplus will widen through to 2015. The Malaysian Rubber Board’s benchmark SMR20 dropped to 230.15 US cents a kilo from 230.35 cents the previous week.

Courtesy Agence France-Presse

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