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Commodities markets summary

Reported by AAP
Friday, December 19, 2014
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A summary of trading in key commodities markets overseas:

ENERGY

Oil prices skidded sharply lower in volatile trade Thursday, pushing the US benchmark futures contract to a new five-year low amid concerns about ample global supplies.

West Texas Intermediate (WTI) for January delivery tumbled $US2.36 to finish at $US54.11 a barrel on the New York Mercantile Exchange. That was the lowest price since early May 2009.

The international benchmark, Brent North Sea crude for February delivery settled at $US59.27 a barrel in London, down $US1.91 from Wednesday's closing level.

The key US WTI contract had edged higher at the opening of the session - supported by Wednesday's official report showing US crude inventories fell last week - but then began to fall and accelerated its losses in the last hour of trade.

"We see a lot of volatility and this volatility seems bound to last until the end of the year, with not much happening, fundamentally," said Carl Larry of Frost & Sullivan.

"It's a lot of holiday trade now," he said, with traders looking in the rearview mirror at important US macroeconomic events: the November jobs report last Friday and the Federal Reserve policy decision Wednesday.

Fed Chair Janet Yellen, in a press conference Wednesday following a two-day monetary policy meeting, said the dramatic decline in global oil prices was good for the US economy, a net importer of oil, as consumers gain extra dollars to boost spending.

Oil prices have plunged from June levels above $US100 a barrel, and OPEC, the oil producers group that supplies about 40 per cent of the world's crude oil, has declined to cut output.

Saudi Arabia, the leading OPEC producer said on Thursday that competitive pressures prevent it from reducing output, and the kingdom can weather plunging oil prices.

"It is difficult, or even impossible, for Saudi Arabia or OPEC to undertake any measure that would lead to a reduction in (their) share of the market and an increase in that of others" who do not belong to the cartel, Oil Minister Ali al-Nuaimi told the official Saudi Press Agency.

Tim Evans of Citi Futures said Nuaimi's comments were seen by some as an unwillingness to give up market share that suggested "a commitment to maintaining production regardless of the drop in price or the projected 2015 supply/demand surplus."

PRECIOUS METALS

Gold prices edged higher Thursday after Switzerland's central bank said it would introduce negative interest rates next year and as traders continued to adjust their outlook on US monetary policy.

The most actively traded gold contract, for February delivery, closed up 30 cents, or less than 0.1 per cent, at $US1,194.80 a troy ounce on the Comex division of the New York Mercantile Exchange.

Prices hit $US1,213.90 an ounce earlier in the session but pared those gains after strong US economic data.

The Swiss National Bank said it would charge banks 0.25 per cent to deposit overnight funds with it, starting January 22. The measure aims to cool the strength of the Swiss franc and keep deflation at bay.

Gold prices surged about $US15 in response to the announcement. Negative interest rates are designed to slowly erode wealth and would likely prompt Swiss investors to shift from holding cash to holding gold, said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.

"The fact that that's the environment in Europe, and now Switzerland, is going to spur safe-haven demand," Mr Haberkorn said.

Some investors buy gold as a form of wealth protection on the belief that it will keep its value better than other assets.

BASE METALS

Copper futures fell Thursday as investors continued to adjust their outlook on demand from Europe and China.

The most actively traded contract, for March delivery, closed down 1.7 cents, or 0.6 per cent, at $US2.8535 a pound on the Comex division of the New York Mercantile Exchange. The copper futures were less than one cent away from ending at a new four-year low.

Russia's financial turmoil kept copper traders on their toes amid worries the problems could spread. The Russian rouble has lost roughly half its value this year, with its decline accellerating in recent weeks as global crude-oil prices tumbled.

"People are concerned that will further slow growth in Europe and what that will do to worldwide copper demand," said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.

Copper is widely used in manufacturing and construction, making its price sensitive to shifts in the pace of economic growth. Europe as a region ranks second, behind China, in terms of copper demand.

Investors also continue to adjust their expectations for next year's copper purchases by China after recent data showed the country's manufacturing activity contracted in December. China accounts for about 40% of global copper demand, and shrinking factory output is considered a signal of declining future demand for the industrial metal.

21/12/2014 07:05Sydney, Australia. 21 December,2014
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