FT: Oil price hits six-month high as dollar slides
Commodities prices rallied on Thursday, with oil hitting a fresh six-month high, as the US dollar fell against other major currencies following the Federal Reserve’s decision to inject more money into the country’s economy.
“The Fed’s solo action weakens the US dollar, which in turn supports commodity prices,” said JBC Energy, the Vienna-based oil consultancy.
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In early trading, Nymex December West Texas Intermediate jumped $1.13 to $85.80 a barrel. It earlier hit $86.05 a barrel, the highest level since May.
Investors have bought oil futures since earlier this week after Ali al-Naimi, the Saudi oil minister and de facto leader of oil producing cartel Opec, told a conference that the kingdom’s preferred price range was $70-$90 a barrel, compared with the previous $70-$80 a barrel range.
In London, ICE December Brent rose $1.02 to $87.40 a barrel, a six month high.
The industry will pay attention to next week’s annual report by the International Energy Agency. The global energy watchdog will throw its weight behind calls for governments to implement pledges to fight climate change and cut fossil fuel subsidies, warning that a failure to do so would significantly inflate oil prices.
The IEA forecasts that implementation of new environmental policies would see demand for oil almost 10 per cent lower by 2035 than under current policy commitments. That would result in prices roughly $20 a barrel lower.
Precious metals prices moved strongly, with spot gold rising to $1,360 a troy ounce, up 1 per cent in early trading in London and nearing its nominal all-time high of $1,387 hit in mid-October. Gold has surged 24.2 per cent since January.
Silver hit a fresh 30-year high above $25 an ounce, up 1.3 per cent on the day. Silver has surged 49.1 per cent since the beginning of the year. Meanwhile palladium surged to $661 per ounce, the highest since May 2001. Palladium has surged 62.8 per cent so far this year, one of the best performing commodities.
Edel Tully, precious metals strategist at UBS, said that over the medium term, the Federal Reserve’s actions would support prices. “We remain bullish on gold, with inflation expectations on the rise, low real interest rates, the fear of currency debasement, resilient physical demand and limited scrap sales, central banks acting as net buyers, and importantly, a desire for haven assets.”
Agricultural commodities also rose as the boost provided by a falling dollar came on top of disappointing crops worldwide and strong demand.
Sugar surged to a fresh 30-year high due to a lower-than-expected crop in Brazil, the world’s largest producer, and low stocks globally. In New York, ICE December raw sugar rose to 31.19 cents per pound, up 3.4 per cent on the day.
Wheat, corn and soyabean prices in Chicago rose by more than 1 per cent on the day. Coffee, cocoa, cotton and rubber prices also rose.
Base metals also rose. On the London Metal Exchange, copper for delivery in three months moved 1.4 per cent higher to $8,478.75 a tonne, while aluminium rose 1 per cent to $2,447 a tonne. Zinc, nickel, lead and tin also posted gains.
