Global commodity prices mostly fell this week as traders took their cue from mounting worries over the Chinese economy, as data showed manufacturing activity contracted to an 11-month low this month.
OIL: World oil prices were shaken by stubborn Chinese demand concerns.
HSBC said in a survey on Wednesday that China’s preliminary purchasing managers’ index (PMI) hit 47.7 this month, down from a final 48.2 last month and the lowest since August last year. A reading below 50 indicates contraction, while anything above signals expansion.
“Weak Chinese PMI data for July weighed on oil prices,” said Lucy Sidebotham, an analyst at energy consultancy Inenco.
“With orders faltering and the suggestion that the economy is still losing momentum, there were renewed concerns over demand growth from the world’s second-biggest oil consumer,” she said.
“However, the overall global outlook looks positive following recent economic data from the US and eurozone, and falling US stockpiles,” she added.
The PMI tracks manufacturing activity in China’s factories and workshops and is a closely watched gauge of the health of the economy.
“The China factor is important and there’s just more and more data showing that the economy is slowing,” added Victor Shum, managing director at consultancy IHS Purvin and Gertz.
“China is expected to account for a majority of oil demand going forward and with a slowing Chinese economy, gains in oil futures will be limited,” he said.
“At this point, oil futures are overvalued so we are seeing downside risks,” he added.
China’s economy has been weakening this year, with growth in the second quarter dipping to 7.5 percent, from 7.7 percent in the first quarter and 7.9 percent in October-December.
By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in September sank to US$106.91 a barrel compared with US$108.93 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for September dropped to US$104.36 a barrel from US$108.67 for the August contract a week earlier.
PRECIOUS METALS: Prices mainly rose, bucking the downward trend on most commodity markets.
“The current rally in the gold price now suggests that investors are returning to the gold market,” UniCredit analysts said in a research note.
Last month, gold slumped close to a three-year low under US$1,200 per ounce, hit by receding inflation fears, upbeat US data, a strong US dollar and expectations of an end to the Federal Reserve’s quantitative easing (QE) stimulus.
By late Friday on the London Bullion Market, the price of gold climbed to US$1,331 an ounce from US$1,295.75 a week earlier.
Silver advanced to US$20.02 an ounce from US$19.42.
On the London Platinum and Palladium Market, platinum gained to US$1,428 an ounce from US$1,422, while palladium decreased to US$731 an ounce from US$743.
BASE METALS: Base or industrial metal prices mostly fell after the poor Chinese data.
“Metal prices find themselves under pressure across the board this morning, once again on the back of weak Chinese economic data,” Commerzbank analysts said.
By Friday on the London Metal Exchange, copper for delivery in three months dropped to US$6,873 a tonne from US$6,941 a week earlier.
Three-month aluminum fell to US$1,802.50 a tonne from US$1,818.
Three-month lead firmed to US$2,059 a tonne from US$2,047.75.
Three-month tin slid to US$19,302 a tonne from US$19,624.
Three-month nickel dipped to US$13,900 a tonne from US$14,070.
Three-month zinc decreased to US$1,862 a tonne from US$1,865.
COFFEE: The market fell once again as traders eyed the prospect of a record harvest this year in top producer Brazil.
“The focus has shifted once more to the prospect of a record crop for a low-yield year in Brazil ... which is likely to put further pressure on prices,” Commerzbank analysts said.
By Friday on NYBOT-ICE, Arabica for delivery in September declined to US$1.2375 a pound from US$1.2915 a week earlier.
On LIFFE, Robusta for September decreased to US$1,935 a tonne from US$1,991.