Commodity markets see mixed course last week

By Burhan Sansarlioglu

ISTANBUL (AA) –

Commodity markets saw a mixed course last week due to various dynamics.

Uncertainties over the Fed’s monetary policy, geopolitical risks, production forecasts, weather and climate events, and developments in the Chinese economy were among the major factors affecting commodity markets.

Uncertainties caused by major banks cutting interest rates continue to impact commodity markets.

The labor market in the US remained tight, while inflation exceeding expectations stood out as the main factor affecting asset prices last week, according to recent data released in the US.

- Precious metals on downward trend except for gold

The ongoing geopolitical risks in the Middle East also had an impact on commodity prices, and analysts say that the increasing risk perception influences the demand for gold.

After the US Producer Price Index (PPI) came in below expectations according to recent data, the rise in gold accelerated on Friday, as expectations strengthened that the Fed would start interest rate cuts in March.

In light of these developments, while the ounce price of gold gained 0.2%, silver lost 0.1%, platinum 5.8%, and palladium 5.2% last week.

The People’s Bank of China (PBoC) officials hinted at the possibility of a new round of monetary easing using the bank’s reserves, which influenced base metal prices.

Annual exports in China exceeded expectations with an increase of 2.3%, revealing a positive outlook for demand.

In Chile, supply concerns in copper decreased with the news that the state-owned mining firm Codelco reached an agreement with the union to represent the supervisors in the mines.

Forecasts for an increase in refined copper production in China also led copper prices to fall.

Under these circumstances, copper went down 1.6%, lead rose 2.5%, aluminum 3%, nickel 1.6%, and zinc 2.3%.

- Energy group saw mixed course

The US Energy Information Administration (EIA) announced that crude oil stocks increased by 1.3 million barrels to 432.4 million barrels in the country.

Market expectation was that the figure would decrease by 1.2 million barrels. Therefore, the unexpected increase meant a decline in demand for crude oil in the US, affecting Brent crude oil prices.

Saudi Arabia-based oil company Aramco’s reduction of its official sales prices in all regions for February, including its export flagship Arab Light, by between $1.5 to $2 per barrel, was another factor that led to a decline in Brent crude oil prices.

The extreme drop in temperatures strengthened the expectations that natural gas demand could reach record highs, leading to a sharp rise in natural gas prices.

The number of natural gas drilling rigs in the US fell by 1 to 117 in the week of Jan. 6 to 12, according to the data from the US-based oilfield services company Baker Hughes.

With these changes in mind, Brent crude oil lost 0.7% despite geopolitical risks, whereas natural gas traded on the New York Mercantile Exchange hiked 15.1% last week.

- Cocoa prices keep hitting new peaks

The agricultural group was on a mixed course last week.

The International Grains Council (IGC) raised its global wheat and corn production forecasts for the 2023/2024 season, causing prices to plummet.

The decrease in drought concerns due to increased rainfall in Brazil led to a decline in soybean prices, analysts said.

In view of these circumstances, the price of wheat traded on the Chicago Mercantile Exchange lost value by 3.3%, corn by 3%, soybeans by 2.4%, and rice by 0.2%.

Cotton prices went up amid forecasts for a decline in global cotton production last week.

The global cotton production is estimated to decrease by 342,000 bales in the 2023/2024 season, according to the recent World Agricultural Supply and Demand Estimates report by the US Department of Agriculture.

Last week, sugar supply concerns were fueled by forecasts that the Brazilian real’s rise to a two-week high against the US dollar may discourage Brazilian sugar producers from exporting.

Although, rainfalls in Brazil caused a decrease in coffee prices.

Cocoa prices continue to test historic highs amid forecasts of falling cocoa stocks and concerns over production.

The Ivory Coast government reported that cocoa deliveries between Oct. 1, 2023, and Jan. 7, 2024, fell by 35% to 870,510 tons, compared to the same period last year.

As for Ghana, concerns regarding cocoa production continue.

Considering these events, cotton traded on the Intercontinental Exchange gained 1.5%, sugar 3.1% and cocoa 2.8%, while coffee saw a downtick of 1.5%.

* Writing by Emir Yildirim