Sun, Jan 03, 2016 - Page 15 News List

Oil spearheads commodities rout

AFP and Bloomberg, LONDON

Oil collapsed by almost 40 percent last year to strike 11-year lows on chronic oversupply, demand fears and China’s slowdown, in a global commodities rout that sent metals tumbling.

Europe’s benchmark oil contract, Brent North Sea crude, nosedived on Dec. 22 to just US$35.98 per barrel — the lowest level since early July 2004.

And US benchmark West Texas Intermediate oil tanked on Dec. 21 to US$33.98 a barrel — which was a point last seen in mid-February 2009.

OPEC has continued to pursue its strategy to maintain its collective oil output, despite abundant supplies of crude that have ravaged revenues.

Crude futures have dived from more than US$100 a barrel in July last year on the strong US dollar and the stubborn worldwide oil supply glut.

However, in both June and last month, OPEC — which pumps 40 percent of the world’s oil — refused to slash output. The Saudi-backed policy is aimed at pushing oil prices lower to squeeze less-competitive players, including US shale producers, out of the market.

The cartel — whose biggest player is Saudi Arabia — is currently producing an estimated 32 million barrels per day, above the group’s 30-million-barrel target. Added to the picture, the US — the world’s biggest consumer of crude — on Wednesday said that oil inventories swelled by 2.6 million barrels to 487.4 million barrels last week.

That confounded expectations for a 2.5-million-barrel drop, and came alongside news of rising US production.

Traders also weighed Saudi Arabia’s austerity budget last year, which suggested that the key crude exporter was planning for oil prices to stay low for the foreseeable future.

The market is also fearful of surging oil supplies from Iran this year, once sanctions are lifted.

“With US production growing for the last few weeks and global inventories being near storage limits, this is yet another reminder that the supply glut could take a long time to clear which may mean even lower oil prices in the near term,” Gain Capital analyst Fawad Razaqzada said. “In fact, Saudi Arabia is already planning for lower oil prices next year. To make matters worse, Iran is ready to pump at least 500 million barrels per day more as soon as Western sanctions on its oil are lifted, possibly in early 2016.”

GOLD: Gold’s image as a haven asset has taken a battering, with the metal heading for its third-straight annual loss as investors sold from gold-backed funds.

Bullion was little changed in London on Thursday after touching the lowest in more than a week yesterday. It was down 10 percent last year and has plunged about 45 percent since reaching a record in 2011.

Gold is in the longest run of yearly losses since 2000 as the dollar surged on the back of tighter monetary policy in the US, joining a collapse in prices of commodities from iron ore to oil.

Holdings in gold exchange-traded funds (ETFs) have declined 10 times in the past 13 sessions to 1,466.4 tonnes, near the lowest in more than six years.

“Gold is suffering from the general exodus out of commodity investments,” Copenhagen-based Saxo Bank A/S head of commodity strategy Ole Hansen said by e-mail. “Being one of the most-traded commodities through ETFs, the selling pressure from paper investors has been felt particularly hard and gold’s safe-haven status has suffered.”

The metal for immediate delivery added 0.1 percent to US$1,062.29 an ounce by 11:52am in London on Thursday, according to Bloomberg generic pricing. It reached a five-year low earlier last month.

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