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Record-breaking crude oil prices seen as ‘story of 2005’
LONDON: Crude prices were catapulted to record heights this year by hurricane weather that ravaged Gulf Coast energy installations in the United States, while copper prices also notched up historic highs.
"Crude oil has been the story of 2005, and will still be a key theme for 2006," noted Standard Chartered analyst Helen Henton.
Strong global economic growth, especially by the United States and China, led to higher demand and rising prices for most industrial and agricultural commodities this year.
Metals shone with gold and platinum hitting multi-year peaks. The Commodities Research Bureau’s index of 17 commodities rose to 328.60 points on Friday, up from 284.50 points in late 2004.
GOLD: The price of gold struck a 25-year high point, despite a strong US dollar, and analysts see no reason why it will not reach higher in 2006.
Gold prices hit $541 in December the highest level since January 1981. Sharply increased demand from investment funds pushed gold higher amid creeping inflation in the United States.
Gold is seen as a safe haven in times of high inflation. Other factors included strong jewellery demand, especially from India and China, and record oil prices.
Historically, a stronger dollar makes commodities which are priced in the US currency on world markets less attractive to buyers using other currencies.
However, "the gold price managed to rally despite prevailing US dollar strength", said Ross Norman, of specialist metals website TheBullionDesk.com.
SILVER: Silver reached an 18-year high in the wake of sister metal gold. An ounce of silver hit $9.27 per ounce in December the best level since May 1987 benefiting from its multiple uses.
Silver demand for jewellery, particularly from India, increased by 14 per cent in 2005 according to London-based metals consultancy GFMS. Industrial demand rose by six per cent this year.
However, demand for photography which accounts for some 18 per cent of the market sank by 12 per cent as the boom in digital photography slashed demand for developing camera films. Growth in demand was expected to moderate in 2006, GFMS said.
PLATINUM AND PALLADIUM: Platinum prices hit the highest level for 25 years on record demand, while sister metal palladium gained modestly.
Platinum prices breached $1,000 per ounce in November, striking the key level for the first time since 1980, and overall rose by 20 percent from a year earlier. According to Johnson Mattey, demand for platinum hit a record 6.71 million ounces, outweighing supply levels for the seventh successive year.
On the London Platinum and Palladium Market, platinum climbed to $959.50 per ounce at the late fixing on Friday, from $833 a year earlier. Palladium stood at $261.50 per ounce, from $188.
BASE METALS: Copper was the star performer with its price continually breaking historic records amid low stockpiles of the metal. Most other base metals reached multi-year highs, though nickel fared poorly.
"Actually, demand growth has slowed dramatically this year, for all the metals and in the case of nickel, it has fallen, that’s why nickel has done so badly." Average global demand growth would be little above 2.0 per cent this year, against 7.0 per cent last year, Briggs added.
Analysts, by contrast, estimate that the current boom in base metals prices could last for some 20 years. By Friday, three-month copper prices on the London Metal Exchange jumped to $4,425 per tonne from $2,968 a year earlier.
Three-month aluminium prices rose to $2,230 per tonne from $1,795. Three-month nickel prices rose to $13,587.50 per tonne from $12,900.
OIL: World oil prices surged to historic heights in 2005 on the back of heightened supply concerns during the most intensive Atlantic hurricane season on record. Crude futures had hit historic high prices in nominal terms in late August following the devastation wrought by Hurricane Katrina, striking $70.85 per barrel in New York and $68.89 in London.
Katrina, which devastated the city of New Orleans on August 29, was the costliest US hurricane on record and devastated US Gulf Coast refineries and oil platforms. A record 14 hurricanes formed in the Atlantic between June and November, while Katrina was followed by Rita in September and Wilma in October.
RUBBER: Rubber prices rebounded in 2005 after US hurricane weather cut supplies, while demand surged, particularly from China and India.
"We’ve seen some very poor weather conditions and natural disasters" which seriously affected global supply, said Corrie McColl trader Rachid Ahmed.
He highlighted Hurricane Katrina, and typhoon weather in eastern Asia, as key factors which "assisted in pushing the price up".
COCOA: The price of cocoa remained stable with political tensions in major producer Ivory Coast having little effect on an abundant harvest.
Fears of a cocoa shortage at the start of 2005 pushed prices close to a two-year high point in New York. They reversed tack because there has been "a much better than expected harvest, particularly for Ivory Coast", an anonymous London broker told AFP.
COFFEE: Coffee prices reached a five-year high on the back of a major production deficit this season, but forecasts of massive harvests limited gains.
Arabica prices reached $139.50 per pound in March, while Robusta prices hit $1,321 per tonne in June. A surplus in world production of some five million sacks of 60-kilogram coffee was forecast for the 2006-2007 season, compared to a deficit of between five and seven million sacks during the current 2005-2006 season.
"The chances of a return to a global 2006-2007 production surplus, based on favourable weather" in major producer Brazil have limited gains, said Andrea Thompson of specialist magazine Coffee Review.
On LIFFE, Robusta quality for March delivery stood at 1,137 dollars per tonne on Friday from 740 a year earlier. On New York’s CSCE market, Arabica for March delivery rose to 97.85 cents per pound on Friday, compared with 94.05 in late 2004.
SUGAR: Sugar futures reached their best level for around 10 years on soaring demand for Brazilian ethanol.
In New York, prices more than doubled to hit 14 cents per pound in December, a level last seen in April 1995. In London, prices increased by 25 per cent to reach an eight-year high above $330 per tonne.
The jump was mainly owing to forecasts of demand outstripping supply as more and more sugar cane was used to produce ethanol, a cheaper alternative to gasoline (petrol). Brazil, the world’s biggest sugar producer, is using 50 percent of its harvest to produce ethanol in the face of rocketing oil prices. Sugar prices have won support this year also from strong demand by India and damage to crops caused by US hurricanes.
By Friday on LIFFE, the price of a tonne of white sugar for March delivery ended at 336.80 dollars against $258.10 a year earlier.
GRAINS AND SOYA: Grains and soya prices suffered from plentiful harvests. At the start of the year, the market was supported by speculative buying, but high production levels eroded prices.
Maize was worst affected, dropping to $1.858 per bushel in November, its lowest level since June 2001. Prices "remained low because of production levels and very high stocks" in the United States, Europe and the rest of the world, according to an anonymous broker at Fimat. Concerns over the avian flu virus also weakened demand for grains and soya, owing to the culling of poultry. On LIFFE, wheat for March delivery stood at 69.25 pounds per tonne on Friday, against 63.75 pounds a year earlier.
COTTON: Cotton prices rose this year. The healthy market was best explained by the tightening of global cotton supply, favourable weather conditions and a 20 percent jump in Chinese consumption, analysts said. China accounts for some 40 per cent of total global demand.
The lifting of quotas on Chinese imports into the European Union and the United States, meanwhile, led to a surge in textile exports from China.
WOOL: Wool prices fell for the third successive year in 2005, unwinding to their lowest level for five and a half years.
The Australian Eastern index sank to 6.31 Australian dollars per kilo in December the worst level since March 2000.
"One of the major impediments to a general price rise has been the lack of demand from Europe," said Graeme Musson, analyst at specialist website Woolmark.info. Stronger growth in demand next year from European countries and from mainland China could herald a rise in prices of the commodity, according to Musson.
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"Es gibt tausende Möglichkeiten, sein Geld auszugeben, aber nur zwei, es zu erwerben: Entweder wir arbeiten für Geld oder das Geld arbeitet für uns."
Bernhard Baruch
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