Oil grabbed back all the losses of the week and hit a new high of $US147.27 in a dramatic day’s trading on Friday.
Friday’s turmoil in sharemarkets in the US and in late trading in Europe over the fate of the Fannie Mae and Freddie Mac mortgage groups was matched in commodities markets as oil jumped by around $US3.50 after Thursday’s $US5.50-plus a barrel rise.
The two days saw all the $US9 a barrel of losses from earlier in the week made up, and the market ended on a volatile note as Iran continued to ferment pressures in the Middle East.
There was also fears of renewed violence in Nigeria and a planned strike in Brazil which could threaten already tight crude supplies in that rapidly growing country and in US markets.
Oil rose $US3.43 Friday to settle at $US145.08 on the New York Mercantile Exchange after hitting that all time high earlier in the day. London Brent crude finished at $US144.49 a barrel, up $US2.46
Iran’s second missile test in the Persian Gulf Thursday evening, increasing tensions with Israel and the West over its nuclear program and there were reports (later denied) of Israeli warplanes using Iraqi airspace and US bases in the region to practice for a potential strike on Iranian targets Friday.
Unrest in Nigeria, Africa’s largest oil producer, continued to set investors on edge.
The main rebel group in the Niger Delta threatened to renew attacks on oil facilities after Britain expressed support for the country’s government while in Brazil a potential strike against Brazilian oil company PetroBras could affect 80% of the country’s oil supply. The strike is due to start tonight, our time.
And the turmoil over the mortgage groups saw the US dollar drop sharply to within a cent of the all time low reached against the euro earlier in the year.
The dollar fell 1.5% to $US1.5938 per euro on Friday , from $US1.5706 on July 4. It touched $US1.5947, the weakest since April. The dollar reached the all-time low of $US1.6019 on April 22.
Some US analysts are warning that the problems with the two mortgage giants could hit all markets if not resolved soon. They are so huge: controlling $US5 trillion in debt — that every market would be affected if there was a major problem with them.
Gold rose on Friday on the worries about the two US mortgage giants, but even that market would be hit if there was a major problem in the US with the duo’s future left uncertain.
Gold hit its highest level since the Bear Stearns rescue in March. Silver also gained.
August gold climbed $US20.10, or 2.1% to $US962.10 an. Earlier, the price reached $US963.60, the highest for a most-active contract since March 19.
September silver jumped 33 US cents, or 1.8%, to $US18.65 an ounce. Silver is now up nearly a quarter in price this year, gold by just over 14%.
Wheat rose Friday for the first time in three days on speculation that livestock producers will use more of the grain in animal feed after US corn costs again surged.
Traders are wondering is the higher price for corn and soybeans will see farmers witching to wheat as a feedstock in feed lots to try and lower input costs.
September wheat rose 12.75 US to $US8.3075 a bushel on the Chicago Board of Trade. That’s up 36% in the past year, but still sharply lower compared to the record $US13.495 hit on February 27.
The US Department of Agriculture said Friday that the US winter-wheat crop will total 1.864 billion bushels after good rain and growing conditions in May and June helped plants in the southern Great Plains from Texas to Kansas.
US inventories of all varieties of the grain, before next year’s harvest, are forecast to rise 75% to 537 million bushels, compared with 306 million this year. Last month, the government forecast reserves would rise to 487 million bushells.
Forecasters expect wheat prices to ease further as a result of that 50 million bushell increase from the USDA.
Wheat prices fell 6.4% last week.
But a different report from the USDA for soybeans saw prices finish higher for a third straight session, climbing to near the record after the report projected a fall US output and stocks because of the worst Midwest floods in 15 years.
The USDA said in its monthly world grain update that the US crop will now total 3 billion bushels, down 3.4% from 3.105 billion forecast in June.
That’s because yields will be lower because of the west weather. Carryover stocks of soybeans will fall 20% to around 140 million bushels, something that is likely to keep prices high as export demand rises.
November soybeans finished 9 cents a bushell higher at $US15.96 a bushel on the Chicago Board of Trade, after earlier rising to $US16.20.
New York sugar rose as oil prices rose and the weaker dollar boosted commodities.
October sugar futures rose 0.39 cent 13.99 US cents a pound in New York. That was virtually unchanged over week but is up 43% in the past year.
Crude oil’s surge was also based on speculation that supplies may be cut by a union’s planned five-day strike in Brazil, which is the world’s largest refiner of ethanol from sugar.
Sugar reached as high as 14.15 US cents a pound in trading on Friday.
