Oil prices tumble under 59 dollars

LONDON: Oil prices sank below 59 dollars per barrel this week for the first time since late May on renewed concerns about weak demand for energy, dealers said.

One week earlier they had hit eight-month peaks above 73 dollars, while one year ago they recorded record highs above 147 dollars -- emphasising the volatility of oil markets in recent times.

"Crude oil is heading for its biggest weekly decline since January, as the US dollar gained against the euro, reducing the appeal of commodities as a hedge against inflation," said David Evans, analyst at BetOnMarkets.com.

"Oil has fallen about 10 percent this week amid concerns a prolonged global recession may sap energy demand."

OIL: Prices nosedived on Friday after the IEA said signs of a strong rally in global economic growth and oil demand were fading.

The International Energy Agency however added in its latest monthly report that there could be a dramatic turnaround for demand next year.

New York's light sweet crude fell as low as 58.72 dollars -- a low point which was last seen on May 18. Brent North Sea oil sank as low as 59.53, which was last reached on May 26.

Nearly one year ago, on July 11, 2008, prices had struck a record peaks above 147 dollars per barrel, but they have since slumped as a vicious global economic downturn slashed energy demand.

This week, British Prime Minister Gordon Brown and French President Nicolas Sarkozy called for more stable oil prices after 12 months that has seen the price for a barrel of crude fluctuate between 32 and 147 dollars.

Group of Eight (G8) leaders agreed Wednesday that 70-80 dollars was a fair price to pay for a barrel of oil, a spokeswoman for Russian President Dmitry Medvedev told reporters.

"The G8 leaders... agreed that this price is fair," the spokeswoman Natalya Timakova said.

Despite the week's fall, oil prices are up more than 60 percent since the start of the year, fuelled partly by a weak dollar and overly upbeat hopes of a recovery in the global economy, analysts said.

In the last two months many economists had announced that the global recession was bottoming out and were forecasting a strong recovery in the second half of this year, the International Energy Agency commented on Friday.

But "over the past two weeks the mood has suddenly changed, as many leading economic and energy indicators continue to show very weak readings, suggesting that the 'green shoots' have been largely driven by a rebuild of inventories rather than by strong end-user demand," the IEA said.

"We thus remain sceptical regarding the much-trumpeted, strong second half 2009 (oil) demand rebound, even if China exceeds expectations."

Oil prices had eked out small gains on Thursday after falling below 60 dollars for the first time since late May as the market pondered sluggish energy demand.

In its weekly oil inventories report Wednesday, the Department of Energy reported a sharp spike in gasoline and other oil product inventories in the week ending July 3.

Although crude oil inventories plunged a sharper-than-expected 2.9 million barrels, the decline was driven by a surge in refinery use.

By contrast, US oil product stockpiles have ballooned in recent weeks because of weak demand amid a severe recession that began in December 2007.

US oil demand over the past four weeks was down 5.9 percent from the same period in 2008.

By Friday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in August nosedived to 59.16 dollars a barrel from 66.26 dollars a barrel one week earlier.

On London's InterContinental Exchange (ICE), Brent North Sea crude for August delivery fell heavily to 59.80 from 66.13 dollars a week earlier.

PRECIOUS METALS: Gold dived to 905.10 dollars per ounce, hitting a nadir last seen on May 6.

"Gold continued to trend lower along with all commodities on the back of renewed US dollar gains and softer global equity markets," said ODL Securities analyst Marius Paun.

By late Friday on the London Bullion Market, gold dipped to 913 dollars an ounce from 932.50 dollars a week earlier.

Silver fell to 12.63 dollars an ounce from 13.44 dollars.

On the London Platinum and Palladium Market, platinum sank to 1,095 dollars an ounce at the late fixing on Friday from 1,185 dollars.

Palladium declined to 234 dollars an ounce from 250 dollars.

BASE METALS: Base metals prices fell across the board amid stubborn worries about a possible economic recovery.

"Market sentiment continued to suffer from increasing pessimism regarding the pace of global recovery," said Barclays Capital analysts.

By Friday on the London Metal Exchange, copper for delivery in three months dipped to 4,890 dollars a tonne from 5,005 dollars a week earlier.

Three-month aluminium decreased to 1,574 dollars a tonne from 1,612 dollars.

Three-month lead sank to 1,625 dollars a tonne from 1,715 dollars.

Three-month tin retreated to 12,700 dollars a tonne from 14,260 dollars.

Three-month zinc fell to 1,530 dollars a tonne from 1,571 dollars.

Three-month nickel slumped to 14,900 dollars a tonne from 16,380 dollars.

COCOA: Cocoa prices aimed higher.

By Friday on LIFFE, London's futures exchange, the price of cocoa for delivery in September rose to 1,693 pounds a tonne from 1,600 pounds a week earlier.

On the New York Board of Trade (NYBOT), the September cocoa contract increased to 2,660 dollars a tonne from 2,494 dollars.

COFFEE: Coffee prices diverged in subdued trade.

By Friday on LIFFE, Robusta for delivery in September rose to 1,354 dollars a tonne from 1,339 dollars a week earlier.

On the NYBOT, Arabica for September dropped to 114.25 US cents a pound from 117.80 cents.

SUGAR: Sugar prices steadied.

On LIFFE, the price of a tonne of white sugar for delivery in August firmed to 456.90 pounds from 445 pounds a week earlier.

On NYBOT, the price of unrefined sugar for September reversed to 16.98 US cents a pound from 17.18 cents.

GRAINS AND SOYA: Grains and soya prices fell as economic recovery hopes dimmed.

"There was a sudden shift in investment sentiment to more of a discouraged, disappointed attitude with regards to the belief that the US economy and the large world economies were recovering," said analyst Bill Nelson at Doane Advisory Services.

By Friday on the Chicago Board of Trade, maize for delivery in December sank to 3.28 dollars a bushel from 3.57 dollars the previous week.

November-dated soyabean meal -- used in animal feed -- fell to 8.94 dollars from 10.06 dollars.

Wheat for September dropped to 5.15 dollars a bushel from 5.29 dollars.

RUBBER: Malaysian rubber prices dropped this week due to lack of buying interest amid the uncertainty over the global economy recovery, dealers said.

Many buyers chose to stay on the sidelines as they were concerned with the economy recovery but expect the market to be lifted next week with enquiries from South Korea and South Africa.

On Friday, the Malaysian Rubber Board's benchmark SMR20 dropped to 159.70 US cents per kilo, from 160.95 cents last week.