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Commodity prices diverge amid mixed demand picture

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(Globalpost/GlobalPost)

Global commodity markets traded mixed this week as dealers reacted to global demand expectations for raw materials including oil and cocoa.

OIL: World crude prices diverged as traders seized on news of demand forecasts from major global energy organisations -- and reacted to positive US economic data.

Weighing on prices "are the demand forecasts of the three leading oil agencies," said Commerzbank analyst Carsten Fritsch.

"Without increased demand or a further cut in OPEC production, the global oil market will thus remain oversupplied, which may explain why oil prices have underperformed equity markets of late," he added.

The International Energy Agency this week eased its global forecast for growth in world oil demand for the second straight month, underscoring the effects of uncertainty from the US budget talks, sluggish Chinese business activity and unemployment in Europe.

The Paris-based IEA, which is the oil monitoring and policy arm of the Organisation for Economic Cooperation and Development (OECD), estimated that demand for oil would total 90.6 million barrels/day this year, a cut of 60,000 barrels from its forecast in February.

"The macroeconomic environment underpinning oil demand, as of yet, shows little sign of short-term improvement," the report said.

"A string of recent developments, including the US sequester, worsening Chinese business sentiment and continued deterioration in European employment lend support to the IEA’s demand growth forecast," it explained.

The Organization of Petroleum Exporting Countries (OPEC) on Tuesday stood pat on its 2013 crude demand forecast, but raised its outlook for production growth by non-OPEC suppliers by 11 percent to 1.0 million barrels a day.

It expects the growth by non-OPEC suppliers to come mainly from North America.

The cartel, which accounts for around 35 percent of global supply, expects global demand of 89.7 million barrels per day in 2013, up 0.8 million from 2012.

The US Energy Information Agency on Tuesday lowered its forecast for the average WTI and Brent prices this year.

It projected the Brent price would fall to an average $108 a barrel this year from $112 last year. WTI prices are forecast to fall slightly this year, but would stick around $92 a barrel through 2014, it said in its short-term energy outlook.

Supporting oil prices, meanwhile, was official data showing that new claims for US unemployment benefits fell last week for the third week in a row, signalling continuing improvement in the troubled jobs market.

A weaker US currency also made the dollar-priced commodity cheaper, spurring demand, analysts said.

A weaker dollar "helped to support crude oil prices", said Ker Chung Yang, senior investment analyst at brokers Phillip Futures.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in May stood at $109.90 a barrel compared with $110.03 for the expired April contract a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for April gained to $93.48 a barrel from $91.21.

PRECIOUS METALS: Precious metals rose across the board, with palladium and platinum boosted by higher car sales in China. The sister metals are used in the manufacture of catalytic converters.

Auto sales in China, the world's top car market, rose in the first two months of the year, an industry group said, indicating strong demand as the country's economy gradually recovers.

A total of 3.39 million vehicles were sold in the country over January and February, rising 14.7 percent from the same period last year, the China Association of Automobile Manufacturers (CAAM) said in a statement.

"Robust vehicle sales had previously already been reported in the US," Commerzbank analysts said in a note to clients.

"If this trend were to continue, platinum and palladium should continue to find good support during the course of the year."

By late Friday on the London Bullion Market, the price of gold grew to $1,595.50 an ounce from $1,581.75 a week earlier.

Silver gained to $28.91 an ounce from $28.78.

On the London Platinum and Palladium Market, platinum increased to $1,593 an ounce from $1,588.

Palladium climbed to $774 an ounce from $769.

BASE METALS: Base or industrial metal prices mostly rose.

"Base metals may have stopped the rot this week, but they have made little overall progress, thus falling yet further behind US stock markets," said Stephen Briggs, senior metals strategist at French bank BNP Paribas.

"They seem unimpressed by the... state of the US economy, focusing instead on niggling worries about prospects for China, where metals demand is picking up only slowly," he added.

By late Friday on the London Metal Exchange, copper for delivery in three months rose to $7,770.50 a tonne from $7,741 a week earlier.

Three-month aluminium edged up to $1,968.75 a tonne from $1,967.

Three-month lead grew to $2,226.25 a tonne from $2,202.

Three-month tin gained to $23,900 a tonne from $23,682.

Three-month nickel advanced to $17,115 a tonne from $16,576.

Three-month zinc dropped to $1,964.25 a tonne from $1,982.

COCOA: Cocoa futures gained ground as traders bet that low price levels would spark stronger demand.

"Current low prices should create new demand," said analyst Jack Scoville at Price Futures Group.

He added: "The main crop harvest is over in Western Africa and much of Asia so that supplies on offer could also be less."

West Africa is home to key producers of the commodity that is mostly used to make chocolate.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in May rose to £1,443 a tonne from £1,404 a week earlier.

On New York's NYBOT-ICE exchange, cocoa for May increased to $2,140 a tonne from $2,093.

COFFEE: Coffee futures diverged as traders tracked weather conditions in major producer Vietnam.

"The crops in Vietnam need rain but have not been getting very much. Producers there say losses could be 25 percent of the production of last year," said Scoville.

By Friday on LIFFE, Robusta for May delivery firmed to $2,174 a tonne from $2,160 a week earlier.

On NYBOT-ICE, Arabica for delivery in May fell to 139.10 US cents a pound from 143.25 cents.

SUGAR: Prices rose in value in a quiet trading week.

"In the absence of further fundamental (supply and demand) news we suspect the markets will continue to trade in low volatility," said Sucden brokers analyst Nick Penney.

By Friday on LIFFE, the price of a tonne of white sugar for delivery in May inched higher to $538.80 from $537.10 a week earlier.

On NYBOT-ICE, the price of unrefined sugar for May increased to 18.86 US cents a pound from 18.82 cents.

GRAINS AND SOYA: Soya prices fell, while there were gains for maize and wheat.

By Friday on the Chicago Board of Trade, May-dated soyabean meal -- used in animal feed -- dropped to $14.38 a bushel from $14.71 a week earlier.

Maize for delivery in May climbed to $7.15 a bushel from $7.03.

Wheat for May increased to $7.23 a bushel from $6.97.

RUBBER: Prices retreated on concerns over rising rubber inventories and signs of weaker demand from China and India, traders said.

The Malaysian Rubber Board's benchmark SMR20 dropped to 271.30 US cents a kilo from 288.40 cents the previous week.

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