Copper and gold rose on Friday, iron ore fell, likewise oil as global commodity markets continue to be far more wary than equity markets about the damage the coronavirus crisis in China could do to its economy and the rest of the world.
Global sharemarkets eased on Friday but they still racked gains of up to 4%, but commodities were far more circumspect.
Oil remains the key commodity as a barometer about the impact of the virus. Futures fell on Friday as traders ignored the stronger than expected US jobs data for January and noticed another rise in the death toll in China.
So far, at least 640 people have died from the coronavirus strain that originated in China’s Wuhan City, while the number of cases have soared to more than 31,000 thus far since the start of January, China’s National Health Commission said on Friday.
Friday’s jobs report for January showed that the economy added 225,000 jobs last month well above the 165,000 jobs expected by economists. US economists say the stronger than forecast jobs figures rule out a rate cut this year in the US.
However, investors are more focused on whether the Organisation of the Petroleum Exporting Countries and its allies (led by Russia), known as OPEC+, are “going to try and make further cuts to production, especially if Chinese demand for oil and LNG tanks by 25% as some reports last week suggested.
All this has seen oil under pressure, sliding into a bear market — a decline of at least 20% in an asset from a recent peak — early last week.
West Texas Intermediate (WTI) crude for March delivery fell 63 cents, or 1.2%, to settle at $US50.32 a barrel in New York. April Brent crude fell 46 cents, or 0.8%, to end at $US54.47.
For the week, WTI slid 2.4%, while Brent fell 3.8%. Both benchmarks saw their fifth straight week of losses, the longest losing streak since November 2018.
The weekly oil rig use report from Baker Hughes added to the negativity around oil. It showed that US energy firms added oil rigs for the third week in four even though producers planned to continue reducing spending on new drilling for a second consecutive year in 2020.
Baker Hughes said companies added 1 oil rig in the week to February 7, bringing the total count to 676. In the same week a year ago, there were 854 active rigs.
The oil rig count, an early indicator of future output, dropped by an average of 208 rigs in 2019 after rising by 138 rigs in 2018.
Even though the number of rigs drilling new wells fell last year, US oil output continued to increase in part because the productivity of remaining rigs – the amount of oil new wells produce per rig – has increased to record levels in most big shale basins.
The pace of US production growth will slow from this year onwards after rising 18% in 2018 and 11% in 2019.
Comex gold futures shook off early losses in New York on Friday and settled higher on the day but lower again for yet another week.
Gold for April delivery rose $US3.40, or 0.2%, to settle at $US1,573.40 an ounce. For the week, gold lost about 0.9% based on the most-active contract, according to data from FactSet.
On the surface, gold should be stronger because it’s a safe haven in times of volatility and global fears (as it is now about the coronavirus crisis). But China is also the largest consumer of gold and the fear is retail and investor demand will fall sharply as shopping malls and other outlets close and travel is banned.
Comex March silver though fell 12.6 cents, or 0.7%, to $US17.692 an ounce, following a gain of 1.2% on Thursday. Silver prices saw a 1.8% drop for the week.
Among other metals, Comex March copper shed 1.5% to $US2.553 a pound. It tallied a weekly rise of about 1.4%, after settling Monday at its lowest since May 2017.
Meanwhile, iron ore prices dipped by around 1.5% over the week, ending at $US83.59, down from $US84.94 the Friday before (for 62Fe fines delivered to northern China).
Traders said seaborne iron ore prices continued to be buoyed by cyclone-led port impacts in Western Australia on Friday – Port Hedland was closed for just over 25 hours, but resumed loading late on Saturday.
Traders will be watching the 2019 production and sales figures to be released by Vale on February 11 and for comments by management on the company’s 2020 iron ore targets.
