Sun, Jul 03, 2016 - Page 14 News List

Oil dips at end of rally from low after Brexit referendum

AFP, LONDON

Oil approached the end of the week down slightly on a midweek rally, but still well ahead of its lowest point after Britain’s shock vote to leave the EU.

North Sea Brent crude recovered from a Monday low of US$47.16 to hit US$49.68 on Friday.

West Texas Intermediate flirted with valuations as low as US$46.33 during the week before reaching US$48.15.

Analysts pointed to several factors for oil’s failure to recoup the pre-Brexit peak of just greater than US$50.

Comments from Bank of England Governor Mark Carney that pointed to a rate cut this summer took the pound and euro lower, striking a blow at demand for US dollar-denominated oil.

And supplies are set to remain ample after clouds hovering over production in Nigeria and Norway cleared.

With Saudi Arabia continuing to fight a battle for market share by cutting prices, “odds are on further weakness next week,” PVM analysts said.

Industrial metals shrugged off losses they had taken through the week in the wake of the British referendum.

Copper reached a two-month high of US$4,856 per tonne on Thursday, while aluminum reached its highest point since the start of May at US$1,664.

Lead and nickel also flirted with three-month highs in Friday trading, helped by expectations that Asian central banks will do more to help economic growth, especially in China.

“Market participants clearly expect the Chinese authorities to take monetary policy measures in the next few weeks in a bid to minimize the negative impacts of Brexit on Asia’s largest economy,” Commerzbank analysts said.

China is the largest consumer of industrial metals worldwide — with the UK accounting for less than 1 percent of global consumption of most base metals.

“Any economic slowdown the UK may suffer will have a negligible impact on the supply-demand balances,” UniCredit analysts said. “Ultimately, the metals might end up being more affected by what Brexit has done to the dollar.”

Gold remained strong over the week, rallying from a slight dip on Monday — when holders cashed in on the precious metal’s spike after the British results emerged on June 24 — to reach US$1,341 per ounce on Friday.

Commerzbank analysts “do not believe that gold will decline significantly,” as investors will continue to prize it as a haven while uncertainty over Britain’s future political direction and relationship with the EU continues.

Among food commodities, coffee and sugar both saw prices bubble up as supply fears hit trading.

Warnings of a lower-than-expected coffee harvest in Brazil saw prices hit a three-week high of US$1,740 per tonne for robusta and the highest point since April for arabica at US$0.148 per pound.

Heavy rains in Brazil also saw white sugar prices jump to 36 percent higher than they had been at the start of the second quarter to US$570.30 per tonne.

And with the pound suffering steep losses after the Brexit vote, cocoa priced in sterling became a more tempting treat, pushing prices as high as £2,412 (US$3,201) per tonne in London before they stabilized slightly lower on Friday.

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