LONDON: Most commodity prices fell sharply last week, with gold under $800 per ounce and crude oil slumping further, as weak economic growth heralded lower demand for raw materials, analysts said.
“Overall, oil has joined a broad commodity sell-off, with precious and base metals also coming off sharply on fears of a global economic slowdown,” said Sucden analyst Andrey Kryuchenkov.
Oil: Crude oil prices tumbled owing to reduced demand for energy around the globe. OPEC on Friday lowered its forecast for world oil demand growth, citing the weak global economy. On Tuesday, the International Energy Agency had said that crude demand was slowing sharply in advanced economies.
“The softening economic situation has led to a further slowdown in oil demand growth,” the Organization of Petroleum Exporting Countries (OPEC) said in its latest monthly forecast. OPEC, which produces about 40 percent of the world’s oil, revised its global oil demand growth forecast for 2008 down to 1.17 percent from 1.20 percent in July.
The organization also kept its 2009 forecast for oil demand growth unchanged at 1.03 percent, according OPEC’s latest report.
“Due to a major slowdown in transport and industrial fuel consumption not only in North America but also in ... Europe and Pacific (industrialized nations), oil demand growth will be on the decline in 2009 which will make the world oil demand growth the lowest since 2002,” the monthly report added.
David Moore, commodity strategist with the Commonwealth Bank of Australia, said “worries about the international economic outlook, and the implications of this for oil demand, remained a damping influence on the oil price.”
Crude futures had fallen on Thursday after official data showed that the 15-nation euro zone economy shrank 0.2 percent in the second quarter, the first contraction since the creation of the single European currency in 1999.
Prices had been supported after the US Department of Energy reported Wednesday that US gasoline reserves had fallen by 6.4 million barrels in the week ended Aug. 8. That was worse than forecasts which had called for a drop of just 2.0 million barrels.
Gasoline stocks are closely watched at this time of year as American motorists hit the highways for their summer vacations, typically pushing up demand for gasoline, which is refined from crude oil.
British energy giant BP, meanwhile, said Thursday that it had resumed pumping gas through the South Caucasus pipeline which transits Georgia, but that the Baku-Supsa oil link remained shut.
Oil prices have sunk since hitting record highs above $147 one month ago. However, crude futures are more than 10 percent higher than at the start of the year when they surged past $100 for the first time in history.
By Friday, Brent North Sea crude for October delivery dived to $111.12 a barrel from $114.06.
New York’s main oil futures contract, light sweet crude for September sank to $112.35 a barrel, from $116.28 a week earlier.
Precious metals: Gold prices tumbled underneath $800 per ounce on Friday, hitting a 10-month low point as the precious metal was hampered by the strengthening US currency and weaker oil prices, analysts said.
The price of gold slid to $772.98, which was the lowest point since the end of October.
Gold, which is used in jewelry, dentistry and electronics, has shed one quarter of its value since striking a record high of $1,032.70 in March.
A stronger US currency tends to reduce demand for dollar-priced goods, like gold and oil, which become more expensive for buyers holding weaker currencies.
At the same time, gold is regarded by investors as a sound defense against inflation, which in many countries is driven by high crude prices.
On the London Bullion Market, gold plunged to $786.50 per ounce at Friday’s late fixing from $852.50 a week earlier.
Silver dived to $12.82 per ounce from $15.76.
On the London Platinum and Palladium Market, platinum dropped to $1,400 per ounce at the late fixing on Friday from $1,552.
Palladium tumbled to $295 per ounce from $345.
Base metals: Base metals prices also fell in unison. “Prices (of base metals) remain weak, pressured by fragile sentiment, lingering worries on the health of the global economy, and a stronger dollar coupled with a slow period for metals demand,” said Barclays Capital analysts.
By Friday, copper for delivery in three months fell to $7,310 per ton on the London Metal Exchange from $7,430 a week earlier.
Three-month aluminum declined to $2,769 per ton from $2,867. Three-month lead sank to $1,689 per ton from $1,994.
Three-month zinc dropped to $1,660 per ton from $1,709. Three-month tin weakened to $18,547 per ton from $19,900. Three-month nickel fell to $18,501 per ton from $17,850.