Sun, Aug 16, 2015 - Page 15 News List

Commodities track China’s currency devaluation

AFP, LONDON

Oil and base metals prices, already hit by oversupply and sagging demand, suffered a fresh blow this week as China shocked markets by devaluing its currency.

However, gold and other precious metals managed to rise over the week.

OIL: New York prices hit 6.5-year low points against a backdrop of high supplies.

US benchmark West Texas Intermediate for delivery next month hit US$41.35 a barrel on Friday — the lowest level since March 2009.

Brent had hit US$48.24 on Monday — the lowest for more than six months.

IG Markets strategist Bernard Aw predicted prices to remain weak after the International Energy Agency on Wednesday forecast the global oversupply backdrop to last into next year.

“The IEA assessment that the supply glut situation would be extended beyond 2015 continues to contribute to the pessimistic outlook for energy,” he said.

OPEC this week said that its output last month rose by 100,700 barrels per day (bpd) from the previous month to 31.5 million bpd.

The producer cartel’s refusal to cut its output level despite weak demand is seen as a reason for a prolonged oversupply, which has contributed to oil prices falling to almost one-third of their peak in the middle of last year.

Analysts have said the move is an attempt by the cartel’s kingpin, Saudi Arabia, to defend its market share as it fends off competition from US shale oil.

Crude prices fell this week also as traders tracked developments over China, the world’s biggest consumer of energy.

Commodity markets in general have been beset by China’s decision to devalue its currency in a bid to boost exports out of the Asian country, which is the world’s second-biggest economy after the US.

The move has supported the US dollar, causing additional pressure for commodities priced in the greenback, by making them more expensive for holders of rival currencies.

By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery next month dipped to US$48.95 a barrel from US$49.02 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for next month slid to US$42.40 a barrel from US$44.21.

PRECIOUS METALS: Gold benefitted from its status as a haven investment amid concerns over China.

The price of gold slumped last month, the start of the third quarter, striking its lowest level in more than five years at US$1,072.35 an ounce.

It has since rebounded back above US$1,100.

By Friday on the London Bullion Market, the price of gold rose to US$1,118.25

an ounce from US$1,093.50 a week earlier.

Silver climbed to US$15.55 an ounce from US$14.75.

On the London Platinum and Palladium Market, platinum increased to US$997 an ounce from US$946.

Palladium grew to US$623 an ounce from US$602.

BASE METALS: Prices for industrial metals were shaken early owing to China’s currency action, before pulling back toward the end of the week.

Copper on Wednesday hit US$5,062 a tonne — its lowest level in six years.

There was a six-year low also for aluminium at US$1,553.50 a tonne, while zinc hit a near four-year trough at US$1,730 a tonne.

“Most metal prices are currently lower than at any time since the 2008/09 economic and financial crisis... due first and foremost to growing concerns about the Chinese economy and an oversupply,” Commerzbank analysts said.

Faced with market concerns, China’s central bank raised the value of the yuan against the US dollar by 0.05 percent on Friday.

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