World oil prices surged this week after Saudi Arabia failed to clinch an agreement over an OPEC output boost, while corn hit a record peak as the US Department of Agriculture cut its inventories forecast.
“The main story that dominated the markets this week was the OPEC meeting in Vienna, amid expectations of a potential increase in oil output. However, OPEC ministers failed to reach an agreement” and kept quotas unchanged, Sucden analyst Myrto Sokou said.
However, markets tailed off late on Friday as many traders took their direction from a US dollar rally. The stronger greenback makes US dollar-priced raw materials more expensive for buyers using weaker currencies, thereby hitting demand and prices.
OIL: Prices rallied following OPEC’s decision to maintain its crude production ceiling, but ran out of steam heading into the weekend as the US dollar rebounded.
OPEC on Wednesday kept its official output target at 24.84 million barrels per day, where it has stood since January 2009, after its deeply divided 12 members could not agree on an increase.
“OPEC’s lack of resolution will have no impact on crude oil production but still sent a bullish statement to the market since several OPEC members obviously are content with the current high price level,” SEB analyst Filip Petersson said.
The announcement sent oil prices soaring. Traders had speculated that the organization would lift its production quotas to help cool oil prices and in turn boost economic recovery.
New York crude was catapulted to US$102.44 on Thursday, touching a pinnacle last reached on May 11.
And Brent oil rallied as high as US$120.07 in early Asian trade on Friday, breaching US$120 for the first time since May 5.
“The market was expecting an increase of the production quota figures or an actual increase on production and what we got was no action on either front,” Andy Lipow at Lipow Oil Associates said.
By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery next month jumped to US$118.26 a barrel from US$115.12 the previous week.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for July eased to US$99.39 a barrel from US$99.75.
GRAINS AND SOYA: The price of corn, or maize, rocketed to an all-time peak at US$7.99 per bushel on Friday, propelled by supply fears after the US slashed its production forecasts.
The US Department of Agriculture (USDA) on Thursday cut its inventories forecast for the new crop year to 335.3 million tonnes. That compared with the previous estimate of 343 million.
“Corn prices jumped as the USDA revised corn production estimates significantly lower this week due to reduced acreage,” Petersson said.
“Planting delays on wet and cold weather has forced some farmers to switch acreage from corn to soybeans that can be planted slightly later than corn without the same risk for yield losses,” Petersson said
“US and global corn inventories are exceptionally tight at the moment and relief will not come until the US harvest starts in September-October,” he said.
Sucden analyst Brenda Sullivan added that sentiment was dented on Friday by the rising US currency.
“The dry weather combined with the USDA report to push corn futures higher across the board yesterday. Today’s trading seems impacted by a stronger dollar, with corn futures trading lower,” she said.