Oil soared on Monday as violence intensified in the Israel-Hamas conflict, stoking supply worries, but the market trimmed its gains in the wake of Wednesday’s ceasefire.
Gold, meanwhile, struck another one-month high late on Friday, as the euro rallied against the dollar on rebounding German business confidence and hopes of a deal on Greece’s latest tranche of bailout cash, dealers said.
Markets were subdued towards the end of the week, with many US participants away on an extended Thanksgiving holiday break, but investor sentiment won a boost from strong manufacturing output data in China.
Investors shrugged off news that European Union leaders had failed to reach agreement over the 27-nation bloc’s long-term budget at a Brussels summit.
OIL: Brent oil prices jumped on Monday to $112.20 a barrel, which was the highest level since October 19 and New York crude hit $89.80 a barrel, last reached on October 22.
However, the market has since handed back some of the bumper gains in the wake of the Gaza truce that dimmed worries over supplies in the crude-rich Middle East.
“The ceasefire in the Gaza Strip has eased major oil supply concerns,” said Sucden Financial analyst Myrto Sokou.
“However, the political and economic conditions across Middle East remain very tentative, offering mixed signals in the oil market.”
The truce ended a week of bloodshed which began on Wednesday, November 14, when Israel killed top Hamas military chief Ahmed Jaabari in an air strike on a car in Gaza City.
The conflict has claimed the lives of more than 160 Palestinians and six Israelis, two of them soldiers.
Oil prices also found strong support from hopes that top consumer the US will avoid the so-called fiscal cliff of automatic tax increases and spending cuts due in January that risks a return to recession.
Crude futures then slumped on Tuesday amid fresh economic strains in Europe after Moody’s downgraded France’s sovereign rating, warning that it was vulnerable to more deterioration as a result of poor economic prospects and exposure to the eurozone debt crisis.
Sentiment was partly lifted on Wednesday by a surprise drop in supplies in the US, which suggested strong demand.
The US Department of Energy announced that the nation’s crude supplies sank 1.5mn barrels in the week ended November 16, instead of the gain of 800,000 barrels expected by analysts.
By Friday on the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for January rallied to $87.67 a barrel from $85.09 for the expired December contract a week earlier.
On London’s Intercontinental Exchange, Brent North Sea crude for delivery in January jumped at $110.83 a barrel compared with $107.83 from a week earlier.
PRECIOUS METALS: Gold prices leapt as the precious metal was boosted by the weak dollar, while silver, platinum and palladium also forged one-month highs.
In late afternoon deals on Friday, gold touched $1,754.65 — the highest level since October 15.
In foreign exchange activity, the European single currency climbed to $1.298 which was the highest level since November 1.
The weaker greenback boosts dollar-priced commodities, which become cheaper for buyers using stronger currencies. That tends to stimulate demand and prices.
Gold also won support as a result of its safe-haven status in times of geopolitical uncertainty.
By late Friday on the London Bullion Market, gold advanced to $1,734.50 an ounce from $1,713.50 a week earlier.
Silver rose to $33.41 an ounce from $32.27.
On the London Platinum and Palladium Market, platinum increased to $1,584 an ounce from $1,554.
Palladium climbed to $657.50 an ounce from $623.
BASE METALS: Prices rose on the back of healthy manufacturing data in China, which is a major consumer of commodities and especially base or industrial metals.
HSBC bank said that China’s manufacturing activity grew for the first time in more than a year in November, reinforcing recent views that the economy is beginning to pick up after several months of slowdown.
The bank’s purchasing managers’ index (PMI) stood at 50.4 this month, compared with 49.5 in October.
It was the first reading above 50 since October 2011 and added to a slew of upbeat trade, investment and sales figures released this month and last that have fuelled optimism.
“China’s November manufacturing PMI, a reasonable leading indicator for metals consumption, rose above 50 for the first time in 13 months,” said Barclays analyst Suki Cooper.
“This is important because readings above 50 show that the industry is expanding, not contracting as it has done for much of this year.”
By late Friday on the London Metal Exchange, copper for delivery in three months climbed to $7,770 a tonne from $7,581 a week earlier.
Three-month aluminium grew to $1,965 a tonne from $1,936.
Three-month lead gained to $2,202 a tonne from $2,147.
Three-month increased to $20,800 a tonne from $20,390.
Three-month nickel advanced to $16,678 a tonne from $16,023.
Three-month zinc improved to $1,959 a tonne from $1,921.
COCOA: Prices sank on profit-taking from the previous week’s strong rally, which was sparked after Ivory Coast President Alassane Ouattara on Wednesday dissolved the top cocoa producing nation’s government.
“Prices soared last week as the Ivory Coast president unexpectedly dissolved his government. However, we do not expect the political risk to cause significant risks to cocoa supply this year,” said Barclays analyst Sudakshina Unnikrishnan.
Top players in the industry descended upon Ivory Coast’s capital city Abijan for the Icco’s (International Cocoa Organisation) world cocoa conference on Tuesday.
“There is real concern in the industry,” said Jean-Marc Anga, executive director of the London-based Icco, in reference to what he said was a structural deficit in supply.
Anga added that demand remained strong in Europe and North America and was exploding in emerging countries such as China or India, but “supply isn’t following.”
By Friday on Liffe, London’s futures exchange, cocoa for delivery in March dipped to £1,583 a tonne from £1,593 a week earlier.
On New York’s Nybot-Ice exchange, cocoa for March slid to $2,457 a tonne from $2,465 a week earlier.
COFFEE: Robusta-quality coffee beans hit a nine-month trough at $1,848 a tonne on worries over abundant supplies.
“The gloomy sentiment on the coffee market is also reflected in the positioning of speculative financial investors,” said Commerzbank analysts.
“The difficult global economic environment and increased exports from Central America are contributing to this stance, as is the record harvest of a high-yield crop year in Brazil.”
By Friday on Nybot-Ice, Arabica for delivery in March dipped to 152.6¢ a pound from 153.6 a week earlier.
On Liffe, Robusta for January slid to $1,864 a tonne from $1,914 a week earlier.
SUGAR: Prices rebounded after striking 2.5-year lows in London the previous week on high production forecasts.
By Friday on Liffe, the price of a tonne of white sugar for delivery in March rose to $519 from $507.80 a week earlier.
On Nybot-Ice, the price of unrefined sugar for March increased to 19.68¢ a pound from 19.11¢ the previous week.
GRAINS AND SOYA: Maize and soya prices drifted lower in quiet holiday-impacted trade, while wheat flattened.
By Wednesday on the Chicago Board of Trade, maize for delivery in December eased to $7.41 a bushel, compared with $7.43 on Friday of the previous week.
January-dated soyabean meal — used in animal feed — retreated to $14.08 a bushel from $14.12.
Wheat for December was unchanged at $8.45 a bushel.
RUBBER: Prices climbed on improving demand from top consumer China, and growing hope of a compromise in the US fiscal crisis.
The Malaysian Rubber Board’s benchmark SMR20 ended the week at 280.65¢ a kilo, up from 277.90¢ the previous week.
An Argor Heraeus-branded one kilogramme gold bar is seen at Gold Investments bullion dealers in London. Gold prices scored one-month highs last week, boosted by Middle East tensions, the faltering dollar and upbeat economic data.
