News of a sluggish first quarter growth rate and renewed Middle East tensions, this time in Saudi Arabia, put some spark into commodity prices after they had been heading for a poor finish to the week.
Most prices still fell over the week but the rise on Friday trimmed those losses.
New York oil futures jumped to an eight month high after Saudi officials announced the seizure of arms, ammunition, bomb making equipment, $US32 million in cash and the arrest of more than 170 people suspected of plotting to attack the country’s oil fields.
June oil rose $US 1.40, or 2.2 per cent, to settle at $US 66.46 a barrel on Nymex in New York; the highest close since early last September.
Crude oil prices have been underpinned by concerns that shipments from Iran, Nigeria and Iraq may be disrupted.
Attacks in Nigeria and Iraq have cut exports while the continuing dispute over Iran’s nuclear program has raised the prospect of lower exports from that country.
Ironically, Iran, which is the world’s fourth-biggest oil exporter, this week will finish distributing petrol vouchers ahead of the introduction of rationing in early June.
Iran imports around half its petrol from other countries because of under-investment in oil processing facilities by successive Islamist governments who prefer to spend on arms and religious projects.
Petrol imports have been cut because of the impact of sanctions over the country’s nuclear projects.
Also impacting prices is a technical pricing situation involving West Texas Intermediate crude oil, or WTI, the main so-called ‘marker’ or benchmark crude for the US market.
It has traded at a discount to the main European marker crude, Brent, (produced in the North Sea), because of rising stocks at Cushing, Oklahoma.
Cushing is where all deliveries of WTI crude take place under US futures contracts and since a fire in a Texas refinery in February, inventories have risen sharply, cutting storage space
That refinery will return to its normal capacity of 170,000 barrels of oil a day by the end of this year but on the weekend a 50,000 bbd capacity refinery in the Cushing area was shut down because of a huge fire caused by a lightning strike.
That refinery draws crude from Cushing and produces jet fuel and naphtha. Its outage will boost stocks in the next week or so.
This means rather than taking delivery of oil many speculators and smaller companies are cashing out contracts or rolling them forward into future months until the position improves, clouding the real level of US futures prices for oil.
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Meanwhile copper prices rose in New York on Friday, reversing a sudden selling surge the day before.
Traders claimed it was a further weakening in the US dollar against the Euro and other major currencies which triggered the rise. This fall reversed a surprise rally the day before.
The rally was surprising given the poor news from the US housing industry on Thursday and the low sales figures for existing homes the day before. They would have normally sparked a slump on expectations of a rate cut.
Certainly the poor US new housing figures for March knocked copper prices because a new home uses a lot of copper: around 180 kgs of the metal.
The slump in the dollar was caused by the now usual knee-jerk reaction to poor economic news: which usually means sell on the expectation of a rate cut. This time it was the low estimate for first quarter GDP growth.
New York copper futures for July delivery rose 2.35 US cents to $US3.5325/lb on Comex.
On the London Metal Exchange, three month copper rose $US86 to $US7,745 a tonne ($US3.51 a pound).
The LME price was down 2.6 per cent over the week but it is up 10 per cent from a year ago and is up 23 per cent this year because of a surge in buying from China. Despite Friday’s jump. Copper was down over the week with prices off by around 2.4 per cent in New York. Traders are watching a possible industrial dispute which may erupt in Peru this week.
In Chicago, May corn closed 1.50 USc lower at $3.7350 a bushel on Friday with the planting season well underway which is when prices become more volatile. Adding to the volatility this year is the strong demand from the heavily subsidised US ethanol industry.
May wheat prices fell 8.5 USc to $US5.1250 a bushel on Friday with an update on the condition of the US crop to be released this week. News of the widespread rains in Australia will also have a depressing impact on futures prices as well.
And sugar continued to fall, hitting 9.20 USc/lb in New York and looking to go lower.
