The oil market extended its dramatic descent this week to strike a six-and-a-half-year nadir close to US$40 per barrel on mounting fears of oversupply and poor demand, particularly from China.
Tumbling world stock markets fanned worries that weak global economic growth would hurt commodity demand, especially in the wake of downbeat Chinese manufacturing data.
However, gold was catapulted higher, benefitting from the precious metal’s status as a safe bet in times of turmoil.
OIL: New York’s light sweet crude plunged on Friday to US$40.04 per barrel, the lowest level since March 2009, as the market was rattled by China jitters.
London’s Brent crude hit US$45.21, a point last witnessed in mid-January and not far off a six-year trough.
Sentiment has dived since China’s central bank devalued the yuan last week in a surprise move seen as aimed at boosting the country’s flagging exports.
However, in more bad news, the preliminary reading of Caixin’s purchasing managers’ index (PMI) came in at 47.1 this month, its worst reading since March 2009 and significantly below analysts’ forecasts.
“The renewed slump in Caixin’s PMI for the manufacturing sector in China in August is likely to increase concerns about demand among market participants, especially since the oil market is significantly oversupplied,” Commerzbank analysts said in a research note.
European, Asian and US shares all sank on Friday, continuing a global equities selloff on the back of China’s economic troubles.
“Oil prices continue to be plagued by the supply glut problem,” IG Markets strategist Bernard Aw said.
“Sharp falls in global equities, particularly US shares, further contributed to worries that global growth would be sluggish. This suggests that demand for energy may remain tepid,” he said.
The market also took a tumble on Wednesday as a surprise rise in US stocks fuelled supply glut fears.
The US Department of Energy said commercial oil stockpiles rose 2.6 million barrels in the week ending Aug. 14, and reported a 300,000-barrel rise at the closely watched Cushing, Oklahoma, trading hub.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in October tumbled to US$45.91 a barrel from US$48.95 a week earlier for the September contract.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for October slid to US$40.91 a barrel from US$44.21 for the September contract.
PRECIOUS METALS: Gold gained further traction, as many investors opted to shelter their cash from the darkening economic outlook.
“It would appear that the metal has regained its status as the ultimate safe haven asset,” analyst Fawad Razaqzada at trading firm Gain Capital said.
“Equities have come under severe pressure in recent days, with the US and European indices joining the Chinese market turmoil,” Razaqzada said.
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. The precious metal has since staged a solid rebound.
By Friday on the London Bullion Market, the price of gold rose to US$1,156.50 an ounce from US$1,118.25 a week earlier.
Silver eased to US$15.46 an ounce from US$15.55.
On the London Platinum and Palladium Market, platinum rose to US$1,028 an ounce from US$997.
Palladium declined to US$610 an ounce from US$623.
BASE METALS: Prices for industrial metals took a heavy knock from growing woes surrounding China’s manufacturing sector.
Copper on Tuesday collapsed to US$4,976 a tonne — the lowest level in six years and below the psychological 5,000 barrier.
There was also a six-year low for aluminum at US$1,549.50 a tonne on the back of increasing production.
By Friday on the London Metal Exchange, copper for delivery in three months tanked to US$5,043 a tonne from US$5,165 a week earlier.
Three-month aluminum declined to US$1,556 a tonne from US$1,572.50.
Three-month lead dipped to US$1,701 a tonne from US$1,742.
Three-month tin fell to US$14,900 a tonne from US$15,520.
Three-month nickel decreased to US$10,125 a tonne from US$10,545, and three-month zinc dropped to US$1,773.50 a tonne from US$1,839.
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