Markets mirror performance of greenback

London

COMMODITY markets swung between losses and gains last week, mirroring the performance of the US dollar. The US currency, which at the start of the week was pushing the euro towards parity, began to fall after the Federal Reserve dropped its pledge to remain "patient" on raising US interest rates. The dropping of the key word from its policy statement at the end of a two-day meeting was a significant step away from its crisis-based monetary policy since 2008 that resulted eventually in the Fed cutting its main rate to zero. Additionally last week, a cautious Federal Reserve marked down its growth forecast for this year by 0.3 percentage point to 2.3-2.7 per cent after noting that US economic growth had "moderated somewhat" since January.

New York's main contract fell to US$42.05 a barrel on Wednesday, its lowest level since March 2009, with the market under persistent pressure from large supplies of crude and a strong US dollar, traders said.

But the price rebounded strongly on Friday as traders snapped up the euro after Greece's deal with its key European partners, who agreed to finish work "as fast as possible" on completing its EU-IMF rescue programme.

Oil markets are tracking also the global supply glut, which was made worse by the 10th straight weekly increase in US crude inventories. Data from the US Department of Energy on Wednesday showed US crude stocks jumped 9.6 million barrels for the week ending March 13, taking inventories to the highest level in at least the last 80 years.

"Traders are still wary of the oversupply situation," said Ric Spooner, market analyst with CMC Markets in Sydney. Mr Spooner told AFP that the supply glut shows no signs of diminishing after the Kuwaiti oil minister on Thursday said that members of the Opec cartel have no choice but to maintain current production levels in order to preserve their market share. Kuwait is a key member of the Organization of the Petroleum Exporting Countries that pumps about one-third of the world's oil.

World crude futures have collapsed by about 60 per cent since June, while Opec's decision in November to keep production unchanged sent oil prices plunging.

The oil market surged briefly on Wednesday after the US central bank signalled it was in no hurry to raise rates, which sent the US dollar tumbling. A weaker US currency makes US dollar-priced oil cheaper for holders of rival currencies, fuelling demand.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in May stood at US$54.99 a barrel compared with US$55.99 for the expired April contract a week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for April rose to US$46.17 a barrel from US$45.28 a week earlier.

Gold recovered after forging its lowest level since December the previous week and as the market tracked developments surrounding the outlook for US interest rates.

"A subdued inflation outlook, a rising dollar and recent weakness in economic data may sway the Fed from going too aggressive on rates," said Ole Hansen, analyst at Saxo Bank.

By Friday on the London Bullion Market, the price of gold rose to US$1,183.10 an ounce from US$1,152 a week earlier. Silver rallied to US$16.17 an ounce from US$15.50.

On the London Platinum and Palladium Market, platinum grew to US$1,129 an ounce from US$1,115. Palladium fell to US$778 an ounce from US$791.

Base or industrial metals came under pressure from a rallying US dollar, before winning support as the US unit lost some of its gains.

By Friday on the London Metal Exchange, copper for delivery in three months rose to US$5,945 a tonne from US$5,837 a week earlier.

Three-month aluminium climbed to US$1,784 per tonne from US$1,754.50. Three-month lead dropped to US$1,752 a tonne from US$1,790.50.

Three-month tin slid to US$17,150 a tonne from US$17,425. Three-month nickel retreated to US$13,035 a tonne from US$13,880. Three-month zinc edged higher to US$2,023.50 a tonne from US$2,011.50.

The commodity retreated on slack demand. By Friday on Liffe, London's futures exchange, cocoa for delivery in May slid to £1,911 (S$3,924) a tonne from £1,994 a week earlier.

On the ICE Futures US exchange, cocoa for May retreated to US$2,700 a tonne from US$2,839 the previous week. AFP