Commodity Blog

Commodity Prices – Oil

Copper extended its rally today after data on nonfarm payrolls eased concerns for US economy. The report on employment change released today showed much smaller decline of work places than was estimated (54,000 compared to predicted 101,000). December futures for copper delivery advanced $0.0125 (0.4 percent) to $3.508 per pound by 10:24 on COMEX.

Wheat prices advanced today as demand for supplies from the US increased after Russia extended its ban on exports. Prime Minister Vladimir Putin announced yesterday that Russia would extend a grain-export ban till the end of the next harvest. At the same time, US exporters sold 110,000 metric tons of wheat to Egypt and 275,000 tons to other buyers. Global stockpiles may fall to 174.8 million tons by the end of the marketing year on May 31st. December futures for wheat delivery gained $0.1775 (2.5 percent) to $7.315 per bushel at 10:33 on CBoT.

Crude oil fell today as decline of service industries in the US caused speculation that demand may drop. The Institute for Supply Management Purchasing Managers’ Index showed a decrease from 54.3 to 51.5 in August. October delivery for crude oil fell $1.51 (2 percent) to $73.51 per barrel as of 11:53 on NYMEX.

Raw-sugar futures gained today on concerns that drought may threaten harvest in Brazil, the largest producer. Harvest of sugar-cane in Brazil’s Center South, the biggest growing region in the world, may be lower than estimated 570 million metric tons if dry weather persists. October delivery for raw sugar rose $0.0063 (3.2 percent) to $0.2038 per pound as of 10:48 on ICE.

While in some countries wheat harvest is also threatened by drought, in Europe wheat faces other danger: excessive rains. Wheat prices jumped on speculation that Germany and some other countries of the Western European Union would have too much rain and also after Egypt bought 225,000 metric tons of wheat from the US. December futures for wheat delivery gained $0.23 (3.4 percent) to $7.0875 per bushel by 13:15 on CBoT.

Crude oil prices jumped today after manufacturing in the US and China expanded in August faster than expected. ISM PMI in the US rose from 55.5 to 56.3 in August. October settlement for crude oil (Brent) went up $1.71 (2.3 percent) to $76.35 per barrel on ICE.

Despite falling down for the first two days of the week, the crude oil is managing to show a positive weekly advancement as of today, while the current daily gain isn’t something exceptional. As with the Forex pair of EUR/USD, GDP data helps.

Oil is a perfect bet when the market believes in the economic growth or recovery. Today we’ve got another proof of that, as the oil rose despite having a moderate weakness; the riskier traders bought it before the GDP release in the United States (1.6 percent growth in Q2 2010). During the first two days of the week, oil lost about 2.8 percent of its value but, starting from Wednesday, it’s showing a moderately strong rally.

This year, the level of $70/barrel looks to be a major bottom limit for this commodity — it was proven for the 4th time this week. Analysts hope that in the near future we’ll hear some positive growth-assuring rhetoric from the world’s officials and that it will be able to support the oil prices further. At the same time, further increases on the oil inventories (and this week we’ve witnessed a report for more than 4.1 million barrel gain in US) can put the prices at risk.

Crude oil (Brent) is now trading near $75.29 per barrel as of 13:21 GMT, going up from $74.85 open price. It traded at as low as $71.75 on Wednesday.

Crude oil fell to its new minimum level since July 7 today as the traders reacted to the speculations about the stalling global economic recovery and sold the commodity after the US housing report showed a decline in the existing home sales to the lowest level in the index history.

The oil is quite sensitive to the pace of the global growth, and if new signals of the feared second wave of the recession loom on the horizon, speculators tend to sell their crude contracts as soon as possible. Being one of the most speculatively traded commodity is a nice advantage during the growing market but it’s a bane during the time when the annual rate of the home sales falls by more than 25 percent in one month in United States.

Today is the fifth straight bearish day for the oil. Since the end of the recent rally (August 4), the commodity had only two bullish daily trading sessions. The analysts forecast a growth of the crude oil inventories for the last week (the report will be released tomorrow). Under the increased supply’s pressure, the prices will probably continue going down.

Spot oil (Brent) is current trading at $72.75 per barrel as of 15:22 GMT. It closed at $73.65 yesterday and touched as low as $72.20 earlier today.

Copper prices declined today after the report of the Federal Reserve Bank of Philadelphia showed that US manufacturing activity unexpectedly slowed in August. Philadelphia Fed index dropped from 5.1 to -7.7 this month. Median forecast was an increase to 7.1. A figure below 0.0 indicates worsening conditions. December futures for copper delivery slid $0.023 (0.7 percent) to $3.3475 per pound by 10:29 on COMEX.

Philadelphia Fed report, together with an increasing number of unemployment claims, also drove down prices for crude oil. Claims for jobless benefit jumped from 488,000 to 500,000 last week. It was even more frustrating, considering that analysts promised a decline to 478k, not an increase. Signs of economic slowdown suggest that demand for commodities, including copper and oil, may wane. October settlement for crude oil went down $1.34 (1.8 percent) to $75.13 per barrel on ICE.

Crude oil fell today as reports showed that US oil and motor gasoline inventories declined less then expected, while US stockpiles of petroleum and distillate fuel increased. US crude oil inventories decreased by 0.8 million barrels from the previous week to 354.2 million barrels, while a decrease by 1.1 million was expected. Gasoline inventories fell 39,000 barrels to 223.3 million, compared to a predicted drop by 375,000. Stockpiles of distillate fuel went up 1.07 million barrels to 174.2 million and petroleum inventories increased by 5.3 million barrels last week.

Analysts say that demand remained strong and even grows, it’s just that growth of supplies outpaced demand. Total US fuel consumption grew 0.4 percent to 19.6 million barrels per day in the last month, while gasoline demand rose 6,000 barrels per day at the same time to 9.45 million, the highest level since August 2008. Reports showed a mixed picture, where balance of supply and demand may easily shift, so oil prices may move in any direction in the future. Prices advance can be limited, though, by concerns for the global economic recovery.

September delivery for crude oil slipped $0.35 (0.5 percent) to $75.42 per barrel on NYMEX. Futures reached $73.83, the lowest price since July 7. Oil prices are still 9 percent higher than at the same period in the previous year.

Crude oil rose today as a rally of global stock markets improved confidence in sustainability of the global economic recovery, increasing demand for fuel. The S&P 500 rose 1.4 percent and the Dow Jones Industrial Average gained 1.2 percent. Oil also gained after the dollar dropped, increasing attractiveness of commodities as an alternative investment. September delivery for crude oil gained $1.16 (1.5 percent) to $76.40 per barrel by 11:23 on NYMEX.

Nickel prices fell on outlook that demand for stainless steel, the main source of consumption for the metal, would weaken. Demand from China, the largest consumer, will stay at 377,000 tons this year. Global nickel consumption will slow to 8.4 percent in this quarter, down by almost half from the previous quarter. Nickel spot price closed yesterday at $21,479 on LME. Prices may reach $17,030, the lowest level since February, before rebounding.

Crude oil declined today for a second day on concerns that slower economic growth in China and the US will damp demand. Year-on-year industrial production expansion in China slowed to 13.4 percent in July, compared to the June growth of 13.7 percent. The report that US inventories of crude oil declined for a second week may support the prices. September delivery for crude oil slipped $1.35 (1.7 percent) to $78.90 per barrel as of 9:57 on NYMEX.

Copper prices also fell on concerns for the global economy. The metal prices slid after the Federal Reserve said that the US economic recovery would be “more modest” and as pace of China’s industrial output growth was slowest in 11 months. Copper also dropped as the dollar surged. September futures for copper delivery went down $0.0705 (2.1 percent) to $3.242 per pound as of 11:22 on COMEX.

Concerns about the global recovery and the recovery in the US pushed gold prices higher today. A decision of the Federal Reserve to keep interest rates at record low levels and speculation that the US government would continue to print money to support economy increased concerns about sustainability of the US economic expansion and drove traders to seek safety, increasing appeal of gold. Previously gold declined as the dollar strengthened. December futures for gold delivery reached $1,207.60 per ounce by 15:12 on COMEX.

Some other commodities, particularly crude oil and copper, reacted much more negatively on pessimistic sentiment across markets. Demand for crude oil depends on the global economic health, and with grim outlook for recovery demand will likely wane. Copper prices were hit not only by news from US, but also but expectations of lower imports in China. Spot price for crude oil was $80.36 per barrel on NYMEX, while copper futures fell $0.0415 cents (1.2 percent) to $3.3125 per pound as of 13:28 on COMEX.

Crude oil gained today after weaker dollar and improving confidence in economic growth increased appeal of the commodity. Initial unemployment claims in the U.S. decreased to 457,000 in the week ending July 24 from the previous week’s revised figure of 468,000. Unemployment in Germany also decreased, falling by 20,000.

The weaker dollar spurred commodity prices. Extensive buying of energy commodities by investment funds also bolstered oil prices.

Positive news from financial markets drew attention away from potentially negative factors. Among such factors are increasing inventories and imports of crude oil in the U.S. Increasing supplies also may show negative influence in the future. OPEC output grew by 80,000 barrels (0.3 percent) to an average 29.24 million barrels per day.

September delivery for crude oil rose by $1.37 to $78.36 per barrel on NYMEX. Prices were up 3.6 percent this month.