Arab Today, arab today oil plumbs 65year low on oversupply china woes
Last Updated : GMT 02:28:27
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Oil plumbs 6.5-year low on oversupply, China woes

Arab Today, arab today

Arab Today, arab today Oil plumbs 6.5-year low on oversupply, China woes

New York's light sweet crude plunged
London - AFP

The oil market extended its dramatic descent this week to strike a 6.5-year nadir close to $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 will 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 Friday to $40.04 per barrel, the lowest level since March 2009, as the market was rattled by China jitters.

London's Brent crude hit $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 its yuan (renminbi) currency 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," said Commerzbank analysts in a research note.

European, Asian and US shares all sank Friday, continuing a global equities sell-off on the back of China's economic troubles.

"Oil prices continue to be plagued by the supply glut problem," added Bernard Aw, market strategist at IG Markets.

"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."

Analysts fear a slowdown in China, the world's second-biggest economy, could drag on global growth and curb energy demand -- bad news for oil prices at a time when markets are already oversupplied with crude.

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 August 14, and reported a 300,000 barrel rise at the closely watched Cushing, Oklahoma, trading hub.

The US and producers from the Organization of the Petroleum Exporting Countries have decided against cutting high production levels despite falling prices as they fight over market share.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in October tumbled to $45.91 a barrel from $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 $40.91 a barrel from $44.21 for the September contract.

- Haven seekers boost gold -

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," said analyst Fawad Razaqzada at trading firm Gain Capital.

"Equities have come under severe pressure in recent days, with the US and European indices joining the Chinese market turmoil.

"Sentiment has been hurt in part because of renewed concerns about the health of the world's second-largest economy."

The price of gold slumped in July, the start of the third quarter, striking its lowest level in more than five years at $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 $1,156.50 an ounce from $1,118.25 a week earlier.

Silver eased to $15.46 an ounce from $15.55.

On the London Platinum and Palladium Market, platinum increased to $1,028 an ounce from $997.

Palladium declined to $610 an ounce from $623.

BASE METALS: Prices for industrial metals took a heavy knock from growing woes surrounding China's manufacturing sector.

"The negative sentiment prompted by the slide in the renminbi has been compounded by further weakness in Chinese equities and another soft reading of the country's manufacturing PMI," said Capital Economics analysts.

"What's more, falling industrial commodity prices are feeding back into growing concerns about the health of the global economy."

Copper on Tuesday collapsed to $4,976 a tonne -- the lowest level in six years and underneath the psychological 5,000 barrier.

There was also a six-year low for aluminium at $1,549.50 a tonne on the back of rising production.

By Friday on the London Metal Exchange, copper for delivery in three months tanked to $5,043 a tonne from $5,165 a week earlier.

Three-month aluminium dropped to $1,556 a tonne from $1,572.50.

Three-month lead dipped to $1,701 a tonne from $1,742.

Three-month tin slid to $14,900 a tonne from $15,520.

Three-month nickel decreased to $10,125 a tonne from $10,545.

Three-month zinc slid to $1,773.50 a tonne from $1,839.

- Sugar market sours -

SUGAR: Prices tumbled to $329 per tonne in London -- hitting the lowest point for six and a half years on abundant supplies and the weak Brazilian Real currency.

"Raw sugar prices have been under pressure due to a combination of oversupply -- a result of five seasons of world production surpluses -- and a weakening Brazilian Real," said Guilherme Kfouri, senior economist at the International Sugar Organization, a London-based industry body.

By Friday on LIFFE, London's futures exchange, a tonne of white sugar for delivery in October dropped to $332 from $349.20 one week earlier.

On the ICE Futures US exchange, unrefined sugar for October fell to 10.56 US cents a pound from 10.59 cents.

COCOA: Futures edged higher in subdued deals, but gains were capped by the prospect of a record 2014/2015 crop in leading producer Ivory Coast.

By Friday on LIFFE,  cocoa for delivery in December rose to £2,073 a tonne from £2,036 a week earlier.

On ICE Futures US, cocoa for December increased to $3,121 a tonne from $3,055.

COFFEE: Prices fell back sharply on buoyant global supplies.

"The price correction reflects ample supplies to the global market in July, buoyed by strong crops in Colombia and Vietnam," said Ecobank analysts.

"However, rising concern over the Brazilian crop, which is weaker than anticipated, and the hoarding of beans by Vietnamese farmers in expectation of higher Robusta prices, will buoy prices going forward."

By Friday on LIFFE, Robusta for delivery in November reversed to $1,653 a tonne from $1,716 one week earlier for the September contract.

On ICE Futures US, Arabica for December stood at 132.60 US cents a pound compared with 142.25 cents one week earlier.

RUBBER: Prices fell, hit also by stubborn concerns over Chinese demand.

On Friday, the Malaysian Rubber Board's benchmark SMR20 dropped to 130.25 US cents per kilo from 133.65 US cents a week earlier.

 

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