LONDON - Oil sank this week on receding fears of a US-led military strike against Syria, and gold hit a one-month low on hopes of an end to US Federal Reserve stimulus.
Investors kept a keen eye on developments in the crude-rich Middle East, as the United States and Russia discuss a plan to remove Syria’s chemical weapons.
Market expectations are growing that the Fed will begin from tapering its $85 billion-a-month asset purchase policy, known as quantitative easing, next week.
The US cental bank will hold its key monetary policy meeting on September 17-18.
OIL: The oil market fell on easing worries over a possible strike against Syria, having risen strongly the previous fortnight on worries over a potential conflict.
New York crude had struck $112.24 a barrel at the end of August, which was the highest level for more than two years.
Although Syria is not a major oil producer, traders are nervous about a broader conflict in the crude-rich Middle East region, including neighbouring Iraq, which is becoming a major exporter.
Russian President Vladimir Putin on Friday insisted Syria was serious about giving up its chemical weapons, as Moscow and Washington entered a second day of talks aimed at averting US-led military action.
Ahead of the main meetings in Geneva, US Secretary of State John Kerry and his Russian counterpart Sergei Lavrov first met with the UN-Arab League envoy to Syria, Lakhdar Brahimi, to discuss a parallel proposal for peace talks.
But it was the issue of chemical weapons that was set to dominate, after Syria’s President Bashar al-Assad confirmed for the first time on Thursday that he planned to relinquish its chemical arms.
“Oil has shed some 3.0 per cent of its value since Monday as what many perceived to be a flippant remark by US Secretary of State John Kerry last week at a foreign office press conference has lead to what may be a face-saving breakthrough for the Obama administration in the Syrian situation,” said analyst Joe Conlan at British-based energy consultancy Inenco.
“Oil fell from the open on Monday at $116 to be trading on Friday afternoon at $112, despite economic data released earlier in the week which showed a further strengthening in the Japanese and Chinese economies.”
He cautioned that any sign of Fed tapering could push prices lower next week, but Syria jitters would provide some support.
“The meeting ... could see the US begin to unwind its quantitative easing policy, which could lead to a further strengthening of the dollar and this in turn may end up being bearish for oil prices,” Conlan added.
The US-Russia talks have put off a planned US-led attack on Damascus for an alleged sarin gas attack by Assad forces last month that left hundreds of Syrians dead. Assad blames opposition rebels for the attack.
Oil was also supported by fresh reports of supply disruptions in crude exporter Libya after the country’s National Oil Corporation on Thursday declared force majeure on three ports.
Libyan oil exports plunged in August by more than 70 per cent after protesters forced terminals to shut in a row over pay.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in October dropped to $111.90 per barrel from $116.00 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for September sank to $107.58 a barrel, from $110.16.
PRECIOUS METALS: Gold hit a one-month low on easing Syria fears, falling US jobless claims and mounting expectations of Fed tapering.
“The price of gold is heading for its worst weekly loss in more than two months as we approach next week’s vitally important Federal Reserve meeting,” said IG trader Max Cohen.
“With the majority of economists surveyed of the belief that the Fed will indeed decide to trim its monthly bond purchases, investors are losing faith in the metal as a store of value.”
Gold tumbled in intra-day deals on Friday to $1,305.04, which was the lowest level since August 8. That dragged sister metal silver to a similar low at $21.40.
“Besides the easing geopolitical tensions in the Middle East, which are causing demand for gold as a safe haven to decline, the market appears to be anticipating a reduction in Fed bond purchases next week,” noted Commerzbank analysts.
By late Friday on the London Bullion Market, the price of gold fell to $1,318.50 per ounce from $1,387 a week earlier.
Silver slipped to $21.72 per ounce from $23.05.
On the London Platinum and Palladium Market, platinum dipped to $1,441 an ounce from $1,498.
Palladium firmed to $700 an ounce from $699.
BASE METALS: Base or industrial metals fell across the board, with copper, lead and zinc striking their lowest levels since early August.
By Friday on the London Metal Exchange, copper for delivery in three months sank to $7,055 a tonne from $7,135 a week earlier.
Three-month aluminium fell to $1,791.50 a tonne from $1,817.
Three-month lead dropped to $2,091.50 a tonne from $2,145.25.
Three-month tin slid to $22,579 a tonne from $22,675.
Three-month nickel decreased to $13,692 a tonne from $13,933.
Three-month zinc slipped to $1,868 a tonne from $1,887.75.
COCOA: Prices hit one-year peak as traders eyed supply-side uncertainty in West Africa, a key producing region of the commodity that is mainly used to make chocolate.
“Cocoa futures hit their highest levels in a year during the week, as uncertainty over West African production provided some support and speculative buying interest contributed to the gains,” said industry publication Public Ledger.
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in March rallied to £1,700 a tonne compared with £1,691 a week earlier.
On New York’s NYBOT-ICE exchange, cocoa for December climbed to $2,595 a tonne from $2,561 a week earlier.
COFFEE: Prices diverged in subdued trade, but won modest support from expectations of good harvests this season.
“Both markets (arabica and robusta) remain firmly anchored by recent bumper crop forecasts for both coffee types and a lack of serious weather problems to change that view,” said the Public Ledger.
By Friday on NYBOT-ICE, Arabica for delivery in December grew to 119.90 US cents a pound from 117.80 cents a week earlier.
On LIFFE, Robusta for November decreased to $1,756 a tonne from $1,773.
SUGAR: Futures climbed on hopes of a lower-than-expected surplus this season—and possibly even a deficit, traders said.
By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October climbed to 17.14 US cents a pound from 16.77 cents a week earlier.
On LIFFE, the price of a tonne of white sugar for October rose to $492.90 from $492.30.
RUBBER: Prices fell due to the strengthening of the ringgit against the US dollar, and on the back of weak demand.
The Malaysian Rubber Board’s benchmark SMR20 declined to 238.50 US cents a kilo from 245.70 cents the previous week.