Commodity Blog

Posts Tagged ‘Greece’

Commodities declined today as the debt problems in Europe, particularly the situation with Greece, don’t show signs of improvement.

Greece’s new budget has a deficit of 8.5 percent, while the nation promised to cut it to 7.6 percent in order to receive new portion of the bailout funds. Now the European politicians argue about providing the aid for the indebted nation that is likely to fail meet other demands for the bailout. Many economists, as well as politicians, think that Greece may face a default as early as November.

November futures for crude oil delivery dropped $1.59 to $77.61 per barrel on NYMEX, the lowest level since September 28, 2010. Prices declined 15 percent this year. Spot price for Brent crude was $100.69 as of 22:18 GMT today on ICE, falling from $101.91. The drop followed the advance to $102.80 — the intraday high.

The lack of positive news from the European Union spurred the return of the downward rally in commodities. Significant drops are seen in the cocoa and soybean futures. The decline was also notable for speculative precious metals — silver and gold.

Investors wait for the European officials to agree on the Greece bail-out plan and its implementation. It’s a very important step, as with the failure of Greece or any other eurozone members the global financial climate would severely deteriorate, sending all markets (except several safe haven assets, like the US dollar and the Japanese yen) crumbling.

Cocoa was in an uptrend during the last two days and has now lost a half of its gain. Soybeans haven’t really stopped falling and now demonstrate the strongest decline since Friday. Both these agriculture commodities depend heavily on the state of the global economy. As a considerable part of their recent growth can be attributed to speculative buying, these positions are now getting closed by the traders to cover up losses in more “serious” markets — stocks and bonds.

Cocoa December futures fell from $2,704 to $2,654 per 10 metric tons as of 16:38 GMT on ICE today with an intraday low at $2,630. Soybeans November futures declined from $1,260.50 to $1,238.50 per 5,000 bushels on ECBOT.

Following a deep 3-day fall caused by the liquidity crisis combined with the global risk aversion, oil is now rising for the second day in a row. The commodity recovered to above Thursday’s open close level and last Wednesday’s high.

Although the extent of the recovery is impressive — more than 4.5 percent from the yesterday’s low, the reasons for this growth aren’t. Oil gained along with the rest of the commodities and stocks inspired by the speculations regarding the Greek debt crisis. After the US Federal Reserve refused to pour extra money into the world’s financial system, it’s now ECB‘s turn to raise or ruin the markets. If the European officials come to an agreement and the eurozone’s central bank will have its hands untied to provide more help (print more money) for the troubled states, the crude oil will be among the most benefiting assets.

While many analysts believe that it’s a viable reason to bet on oil (among the other oversold commodities), some warn the market participants about the possibility of the unfavorable outcome of the events. If Greece has to declare a real default or if some of the eurozone’s members will have to leave the union, the catastrophe for oil may be even worse than the 2008 financial crisis fall.

Brent oil blend went up from $104.63 to $106.27 per barrel on the spot market as of 17:50 GMT today. A monthly low of $101.66 was reached yesterday for this energy commodity.

Most commodities fell today as the European leaders haven’t reached any decision regarding the region’s debt problems. Copper and oil were among losers. Gold gained, as it usually does in times of troubles and uncertainty.

European finance ministers discussed over the weekend the situation with Greece, but haven’t reached any progress in finding appropriate way out of the nation’s debt troubles. Talks about a default in Greece are heard more and more frequently among market participants. The speculation about additional tightening in China also has its negative influence on most markets.

December futures for delivery of copper slid as much as $0.163 (4.2 percent) to $3.7685 per pound on COMEX before trading at $3.7765 per pound by 10:29. October future for for delivery of crude oil dropped $1.61 to $86.35 per barrel, the lowest price since September 12, and traded at $86.85 as of 13:28 on NYMEX. December contract for gold delivery gained $33.30 (1.9 percent) to $1,814.70, the biggest advance since September 8, at 13:49 in New York.

The optimism for the European economy, which was caused by yesterday’s announcement of the European Central Bank, quickly waned today. As a result, gold posted the biggest gain and oil showed the biggest drop this week as risk appetite went away.

The ECB announced yesterday that it’ll sell dollar to the European banks in the joint effort with other central banks of the developed nations. The European Union finance ministers said at today’s meeting that they won’t support the lenders. Finland may halt the bailout for Greece by the demand of collateral. The European leaders rejected the offer of US Treasury Secretary Timothy Geithner to perform tax cuts and spending increase, arguing that the debt crisis made such actions impossible.

October futures for delivery of crude oil slid $1.54 (1.7 percent) to $87.86 per barrel by 12:28 on NYMEX. November Brent crude subtracted $0.18 to $112.12 per barrel on ICE. Contract for delivery of gold in December jumped $33.30 (1.9 percent) to $1,814.70 on COMEX by 13:49 in New York, showing the biggest advance since September 8.

Wheat slumped today on the forecast that rains will ease drought in the US Great Plains. Mike Tannura, the president of forecaster T-Storm Weather, predicted storms may parts of Kansas, Oklahoma, Colorado and Texas may receive a half inch (1.3 centimeters) to an inch of rain by September 16. Rainfall would be welcomed by US farmers, who are just beginning to plant winter crops. Contract for delivery of wheat in December dropped $0.2525 (3.5 percent) to $7.02 per bushel as of 13:15 on CBoT, posting the biggest decline since September 1.

Gold futures today gained as concerns about the European sovereign-debt crisis strengthen. Greece’s budget deficit widened 22 percent over this year. German Chancellor Angela Merkel claimed she won’t let Greece to sink into “uncontrolled insolvency”, but such claims weren’t been able to convince many market participants. December futures for delivery of gold rose $16.80 (0.9 percent) to $1,830.10 per ounce by 14:01 on COMEX.

The sentiment on markets was pessimistic today. As a result prices for copper and oil fell, while gold gained.

Concerns about the crisis in the European Union intensified after German economist Juergen Stark resigned from the European Central Bank’s Executive Board today, leading to the speculation Germany will increase opposition to bailing out Greece. Traders also speculate that Greece may be forced to leave the Eurozone. US President Barack Obama spoke today, but failed to ease worries about the state of the US economy.

The MSCI All-Country World Index and the Standard & Poor’s 500 Index both dropped as much as 3.1 percent.

October futures for delivery of crude oil fell $1.81 to $87.24 per barrel on NYMEX. December futures for delivery of copper slid $0.141 (3.4 percent) to $4.0025 per pound by 13:00 on COMEX. December contract for delivery of gold advanced $2 (0.1 percent) to $1,859.50 per ounce as of 13:49 in New York.

Gold prices reached their new all-time high level today and then retreated slightly. They still remain in the zone above the previous record maximum levels, signaling a strong demand for the commodity amidst global financial troubles.

The shiny metal is rising on the uncertainty with the debt ceiling that needs to be raised before August 2 when the United States will have to declare default on its public debt in case no further debt will be issued. Meanwhile, the situation in Europe isn’t much better — Greece’s credit rating was downgraded from Ca to Caa1 with the developing outlook by Moody’s. For the global investors it becomes evident that keeping their funds in anything tightly connected with the currencies or the financial system is currently less safe than in gold.

Debt negotiations by the US authorities are still heading nowhere. But even if the debt ceiling will be raised, it would mean nothing good for the US dollar and consequently will benefit gold, as the Federal Reserve will have to issue more money to support country’s spending. Some experts even project $1,800 per troy ounce as the viable price for this commodity by the end of the year.

Gold rose from $1,598.84 to $1,613.19 or about 0.9 percent as of 19:25 GMT on the spot market today. The record high level that was reached today is at $1,622.76.

Crude oil headed to the fourth weekly gain on hopes that the US and Europe would be able to resolve their debt problems. The European leaders announced after the summit €159 billion to help Greece and accepted a temporary default for the nation to prevent the crisis from spreading. September futures for delivery crude oil gained $0.48 to $99.61 per barrel in electronic trading on NYMEX before trading at $99.43.

Copper fell to the lowest level in four weeks after the report showed that manufacturing in China, the biggest user of the metal in the world, slowed. China’s Flash Manufacturing PMI and Flash Manufacturing Output Index were at the lowest level in 28 months, according to HSBC Purchasing Managers’ Index Press Release. September futures for delivery of copper slid $0.0525 (1.2 percent) to $4.3835 as of 13:09 on COMEX, the biggest decline since June 23.

Wheat dropped as demand for the US exports declines, while exports from Russia grow. The US Department of Agriculture reported that US export sales declined 22 percent to 403,528 metric tons, the lowest since the end of May, in the week ended July 14 from a week ago. Russian agriculture minister claimed that the country may ship to foreign buyers as much as 18 million tons in the year that started July 1. September futures for delivery of wheat contracted $0.1975 (2.8 percent) to $6.7725 per bushel by 13:15 on CBoT, the biggest drop since June 30.

Soybeans extended the longest rally since August on concerns that adverse weather may hurt crops in the US. The National Weather Service predicted that temperatures will be 12 degrees Fahrenheit above normal for five days starting July 16 in the Midwest. November futures for delivery of soybeans added $0.02 cents (0.1 percent) to $13.8175 per bushel at 10:30 on CBoT.

Gold retreated from the record as Federal Reserve Chairman Ben Bernanke spoke today, indicating that the Fed won’t add more stimulus for the US economy. Earlier the precious metal jumped to a record as Fitch Ratings downgraded Greece’s credit rating. August futures for delivery of gold gained $4.10 (0.3 percent) to $1,589.60 as of 12:46 on COMEX after reaching the all-time high of $1,594.90 per ounce.

Sugar posted a biggest drop in eight weeks today on the forecast that production in Brazil will be bigger than previously estimated. Prices climbed 24 percent in the last month on concerns about output. October futures for delivery of raw sugar slumped as much as 0.0122 (4 percent) to $0.2902 per pound by 14:00 on ICE, posting the biggest drop since May 19. Yesterday, the price reached the highest level in five months of 0.3133 cents.