Global Recap – 4th Oct, 2008

Crude oil jumped nearly 8% on signs Saudi Arabia had made substantial cuts in its crude supply and as global markets rallied. Saudi Arabia, the world's biggest oil exporter, has reduced exports by around 900,000 barrels per day from a peak in August, one source estimated. The petroleum markets have rebounded from lower overnight levels on a trio of supportive factors: a weaker U.S. dollar, a push to the upside in global equity markets and market talk that Saudi Arabia may have already cut crude oil production. Moreover Saudi Arabia's supply cut helps to remove doubts about whether the world's top exporter would comply quickly with a 1.5 million barrel per day output cut agreed by the Organization of the Petroleum Exporting Countries in Vienna last month. The United Arab Emirates has reduced its production to around 2.3 million barrels per day from around 2.5 million bpd, a top state oil company official said.

Gold and silver surged sharply on a combination of a weaker dollar, the rise in oil and a calmer atmosphere in the global markets amid strength across the commodity sector. Gold is supported by weaker dollar as investors awaited results of U.S. Presidential election. Gold, silver rallied as credit markets thawed and as the Federal Reserve injected more liquidity. Active buying during the Europe sessions and lower Libor rates helped boost gold buying. A combination of a string of central bank rate cuts and a win by Senator Barack Obama may buoy the dollar and pressure gold.

Factory orders dropped for the second straight month in September as businesses cut back on purchases of steel, computers and other equipment amid the economic downturn, according to the government report. The Commerce Department said factory orders tumbled by 2.5% from August, much worse than the 0.7% drop analysts expected. That's on top of a revised 4.3% decline in August.

Industrial metals climbed higher with copper rallying more than 5% as rising equity markets and a weak dollar boosted prices. Copper is lacking direction and is looking to external factors. European shares surged 2% by mid-session while the dollar slipped against the Euro and yen, boosting commodity prices across the board, including oil and gold. About 2 million tonnes of China's 4.6 million tonnes of refined copper capacity are reducing production rates and cuts may continue through the first quarter of next year, according to the smelter officials. The long-term outlook on copper is very bearish as many Chinese fabricators are cutting production on slumping demand. Poor demand for copper is reflected by the continuous jumps in inventories. Stocks of the metal in LME registered warehouses jumped another couple of thousand tonnes, bringing the total to 241,650 tonnes -- it’s highest since March 2004.

Courtesy: Religare Commodities


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