Non-energy commodity prices fell by 2.5 percent in September on weaker demand prospects and appreciation of the dollar—up 2.9 percent against a broad group of U.S. trading partners. Declines were heaviest for metals, and less so for agriculture products. Energy prices edged higher. Since end-December, energy prices are up 11.6 percent, agriculture prices are up 1.1 percent, while metals have fallen 4.0 percent. Most main commodity indices peaked early in the year and have since declined on slowing demand.
Crude oil prices rose 0.3 percent in September, averaging $100.8/bbl, however daily prices have been volatile. Oil prices dropped during the second half of the month reaching $91/bbl in early October before recovering back above $100/bbl most recently. Although market participants are concerned about further slowing of oil demand, prices remain underpinned by very tight light/sweet crude markets and low inventories. Prices between Brent and WTI narrowed slightly in September, at $110.9/bbl and $85.6/bbl, with WTI still heavily discounted because of surplus crude in the U.S. mid-continent. Meanwhile the strength of internationally traded Brent has been driven by loss of Libyan exports, production problems in the North Sea, and disruptions elsewhere, notably West Africa. Libya’s oil production has started to recover since the fall of Tripoli in early September, reaching 0.35 mb/d in early October. Libya’s national oil company and joint venture partners have moved quickly to restore output from areas unaffected by the fighting. Crude exports have been minimal, as most of the initial production is destined for local refineries to meet domestic demand. Production is expected to reach 0.6 mb/d by year’s end, but would still be far below pre-crisis levels of 1.6 mb/d.
Natural gas prices in the United States fell by 3.8 percent in September as moderate seasonal temperatures at the end of summer and in early fall curtailed gas demand. Storage injections have been strong and have narrowed the stock deficit relative to the five-year average. Meanwhile shale gas production continues to climb.
Agriculture prices fell by 1.4 percent in September, led by decreases in beverages and fats & oils. The largest declines were for coconut and palmkernel oils (down 10 and 7 percent respectively) due to weak demand and competition from other oils. Cocoa prices fell 6 percent due to higher stocks and a market in record surplus. Coffee robusta prices dropped 5 percent due to abundant supplies and indications that the 2010/11 crop year has moved into surplus. Tea prices decreased 5 percent owing to the seasonal decline in production and quality in Kolkata. Maize and soybeans prices also fell 5 percent on improved supply prospects in the U.S. and South America. Partly offsetting these declines, rice prices rose 6 percent after the Thai government guaranteed producers higher prices, which induced stock holding and less supply to global markets.
Metals and minerals prices declined 4.8 percent in September, following a 4 percent drop in August, on concerns about the impact of sovereign debt problems on economic growth, and on-going worries about slowing demand in China. Copper prices fell 8 percent on continuing high stocks, although Chinese import demand has strengthened after a lengthy period of destocking. Nickel prices decreased 7 percent on slowing demand and expectations of large ramp-up of new supply projects in the coming months. Tin prices fell 5 percent, and the Indonesian Tin Industry announced it would ban exports from October 1st until prices recovered. Silver prices decreased 5 percent on investor liquidation and expectations of slowing industrial demand for the metal.
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