Commodity prices endured great volatility this week as traders in oil, metals and grains reacted to Japan’s nuclear disaster and mounting unrest in Libya.
OIL: World oil prices steadied as instability in oil-producing regions offset the prospect of lower crude demand in Japan, analysts said.
“Prices continue to be underpinned by events in the Middle East, especially Libya and Bahrain,” CMC Markets analyst Michael Hewson said.
Victor Shum of Purvin and Gertz energy consultants in Singapore, noted the “volatility ... as the markets weigh the importance of the nuclear crisis in Japan and unrest in the Middle East.”
Emphasizing the week’s volatility, Brent oil dived US$3 on Friday immediately after major crude exporter Libya called a ceasefire with rebels, easing fears about possible damage to its energy facilities.
Ahead of the ceasefire announcement, crude futures rose in response to the UN sanctioning air strikes against Libya, where popular unrest has practically halted exports of its crude to the West.
“The potential damage to the country’s oil infrastructure is obviously bullish [supportive] for oil prices,” PVM brokers analyst Tamas Varga said of Libya.
Libya responded to the UN deal by announcing on Friday an immediate ceasefire in the month-long battle against rebels fighting to overthrow Libyan leader Muammar Qaddafi, saying it was complying with demands from the UN Security Council.
Libya was producing 1.69 million barrels a day before its recent unrest, according to the International Energy Agency (IEA), of which 1.2 million were exported, mostly to Europe. However the IEA said this week that Libya’s oil exports would “remain off the market for a considerable time.”
Unrest in oil-producing Bahrain was also contributing to the market jitters.
Standard & Poor’s said on Friday it had cut Bahrain’s long and short-term local and foreign currency sovereign credit ratings because of mounting political unrest in the Gulf monarchy.
Markets were also tracking the latest developments in Japan, the world’s third-biggest importer of oil and which is struggling to overcome a nuclear disaster following last week’s devastating earthquake and tsunami.
“Four percent of Japan’s power plant capacities are offline on a sustainable basis after nuclear power plants have been shut down, meaning that Japan’s energy requirements have to be covered to a greater extent by fossil fuels such as oil, coal and gas,” Commerzbank analysts said in a research note to clients.
Brent crude oil plunged almost US$6 at one stage on Tuesday, as fears grew over the potential nuclear disaster in Japan. Analysts said this was because major radiation leaks would likely hamper reconstruction and economic activity in Japan, the world’s third-biggest economy and that in turn would weigh on the country’s oil consumption.
By late on Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in May stood at US$113.29 a barrel compared with US$113.50 for next month’s contract one week earlier.
On the New York Mercantile Exchange, West Texas Intermediate, or light sweet crude, for next month gained to US$100.22 a barrel from US$99.86 a week earlier.
PRECIOUS METALS: Gold was unable to benefit from its traditional safe-haven status until late in the week amid escalating unrest in Libya.
“Paradoxically, the ultimate safe haven asset suffered alongside equities ... on fears over Japan’s nuclear fallout,” VTB Capital analyst Andrey Kryuchenkov said.
The previous week, gold had hit a record peak of US$1,444.95 per ounce, dragging sister metal silver to another 30-year high at US$36.75.
By late Friday on the London Bullion Market, gold rose to US$1,420 an ounce from US$1,411.50 a week earlier.
Silver increased to US$35.15 an ounce from US$34.10.
On the London Platinum and Palladium Market, platinum dipped to US$1,720 an ounce from US$1,777.
Palladium fell to US$727 an ounce from US$754.
BASE METALS: Tin and nickel prices slumped 6 percent early in the week on worries about a potential slide in Japanese demand. Japan is the world’s second-biggest consumer of nickel and third-largest of tin.
A drop in Indonesia tin exports “was more than compensated by the expected lower demand from Japan,” analysts at Commerzbank said.
“The Japanese earthquake has been the largest driver of the base metal complex over the past week,” analysts at Barclays Capital said.
Base metal prices mostly -recovered by the end of the week amid geopolitical unrest.
“Lead is viewed as the immediate beneficiary due to the need for generators and batteries in light of power problems ... Other metals such as aluminum, copper and zinc should also benefit from reconstruction of buildings and power network, but over a longer timeframe are also likely to suffer from short-term cutbacks in industrial activity,” they added.
By late Friday on the London Metal Exchange, copper for delivery in three months grew to US$9,550.50 a tonne from US$9,163.25 a week earlier.
Three-month aluminum increased to US$2,555 a tonne from US$2,547.
Three-month lead climbed to US$2,679 a tonne from US$2,417.
Three-month tin fell to US$29,550 a tonne from US$29,700.
Three-month nickel expanded to US$26,750 a tonne from US$26,112.
GRAINS AND SOYA: Prices ended higher after a topsy-turvy week.
“There has been no palpable shift in market fundamentals over the past week, but a combination of risk aversion, geopolitical tensions, high oil prices and their implications on global growth and the earthquake in Japan have all proved an inhospitable environment for prices,” Barclays Capital analysts said.
By Friday on the Chicago Board of Trade, May-dated soyabean meal — used in animal feed — rose to US$13.48 a bushel from US$13.34 a week earlier.
Maize for delivery in May gained to US$6.73 a bushel from US$6.64.
Wheat for May climbed to US$7.29 from US$7.18.
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