Global Recap -21st Jan, 09

Crude oil revolved around $40 a barrel as further evidence emerged of a deepening global slowdown that is crushing demand for fuel. The global oil demand is expected to contract more sharply in 2009 than previously expected, as the deepening economic crisis spreads to the developing world. World oil demand is predicted to fall by 430,000 barrels per day (bpd) in 2009 to 85.43 million bpd, with demand growth in emerging economies falling by more than half compared to 2008. Moreover China in its six-year commodity price rally started in 2002, was expected to release fourth-quarter GDP data this week that economists say will show 7.0% growth, the slowest pace of expansion in nearly a decade for the world's third-biggest economy. Crude oil stocks in the United States, the world's biggest energy consumer, rose by 1.4 million barrels last week, with distillate stocks seen down 1.4 million barrels due to cold winter weather. Gasoline stocks are expected to be up 2.1 million barrels, up 5.1 million barrels from a year ago.

Gold eased but held above $850 an ounce as interest in the metal as a haven from risk supported prices. A combination of underperformance in other assets, fears over economic growth and the falling interest rate environment are all boosting the appeal of gold. On the currency markets, the euro firmed a touch against the dollar amid a spate of bad news from the euro zone economies. European Central Bank President Jean-Claude Trichet played down the threat of deflation as he hinted at further interest rate cuts and dismissed speculation about a euro zone break-up. Trichet said that while the central bank was wary of cutting interest rates too low, policymakers had not said the current 2% setting was the lowest level. Financial turmoil and downgrades to Greece and Spain's credit ratings. The economy is expected to contract by 1.6% this year, twice the 0.8% fall seen in last month's poll, but slightly better than the 1.9% contraction forecast by the European Commission.

Copper dwindled and aluminum slumped to a 5-1/2 year low as news that world's biggest miner BHP Billiton was cutting jobs due to the global recession hit market sentiment. BHP, which until now had set itself apart from other miners by maintaining output, writing off $1.6 billion, as it battles a collapse in commodity prices. Further rise in copper and aluminum stocks also weighed on prices. Aluminum producers have moved towards cutting output but there is so many surpluses metal around in the world that making its way into the warehouses. But the supply cutbacks have so far failed to support metal prices as the market focused on demand, which analysts said had dried up in the last couple of months. Falling base metal prices due to a slump in demand have forced miners to scale-back production and downsize. Consumption in China temporarily cools with most firms having finished their purchases ahead of the Lunar New Year holidays.


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