August crude oil fell 41c a barrel on Friday to $US128.88 a barrel on the New York Mercantile Exchange, the lowest close since June 5. (Futures reached a record of $US147.27 on July 11.) Last week's decline was the biggest in percentage terms since December 2004, when oil closed at $US42.54 a barrel that week. Last week's $US16.20 a-barrel fall was the largest weekly drop in dollar terms since the futures began trading in 1983.
Helping was a report showing that high oil prices are having an impact on US consumption. It fell 3% in the first half of 2008, the biggest decline for the period in 17 years, according to the American Petroleum Institute in a monthly update. "While U.S. refiners churned out record and near-record amounts of oil products, imports – especially product imports -- fell substantially," the API report said.
"Deliveries of all oil products – a measure of demand – fell 3.0 percent compared with the same first-half-year period in 2007, with gasoline deliveries slipping 1.7 percent. "For the preceding three years, oil demand had essentially held steady. "API statistics manager Ron Planting said, "At 20.08 million barrels per day, total demand was the lowest in five years. And the decline in gasoline demand was the first significant one recorded in 17 years.
"Higher pump prices and a slowing economy were undoubtedly factors. "At 2.0 percent, the second-quarter decline in demand for gasoline was even greater than for the first six months. "However, the 1.8 percent decline for all products for the last three months, compared with the same period a year ago, was less in part because of a 2.1 percent increase in demand for distillates, which includes diesel fuels and home heating oil."
In London September Brent crude oil fell 88 USc to $US130.19 a barrel on London's ICE Futures Europe exchange, the lowest close since June 5. Gold and silver fell Friday after the three day share rally cut demand for the precious metals as an alternative investment.
Not even the surge in US producer and consumer inflation in June (to 9.2% and 5% annual rate respectively) saw any real upsurge in demand or talk about a hedge against inflation. Comex August gold futures fell $US12.70 to $US958 an ounce on the New York Mercantile Exchange after hitting a low of $US950.20.
Gold dropped 0.3% over the week while September silver futures fell 2.9% to $US18.20 an ounce. Silver is still up 22% so far this year and gold, 14%. Corn also fell, ending the biggest weekly drop in 12 years, after Argentina revoked controversial escalating taxes on some grain exports. That ended a fight with farmers that had disrupted shipments of grain from the country for much of this year and saw a significant rise in social and political tensions in the country.
The weakness spread to soybeans and wheat which also dropped as traders realised that Argentina should be able to step up exports of both of those products without too much hindrance. Argentine President, Cristina Fernandez de Kirchner withdrew the tax proposals after failing to win support on her tax plan from Congress.
Farmers had threatened to resume a four-month protest unless the decree on taxes was revoked. The country is the world's second-largest corn exporter, the third major soybean exporter and a top five wheat shipper. December corn futures fell 21.5 USc, or 3.3% on Friday to $US6.285 a bushel on the Chicago Board of Trade. That took the week's fall to 11%, the largest drop since 1996. November soybean futures fell 50c, or 3.3%, to $US14.48 a bushel, down a total of 9.3% and the biggest drop for four months.
But the price is still up 70% in the past year after reaching an all-time high of $US16.3675 at the start of this month. September wheat futures fell 5.5 USc, to $US8.04 a bushel; a fall of 3.2% over the week.The price is still up 29% in the past year, reaching a record $US13.495 in late February. And copper, the other significant indicator of industrial demand, fell, posting a second straight weekly decline as supplies rose and economic growth slowed in China, the world's largest consumer of the metal. Stocks rose 13% last week to 42,935 tonnes, the highest since late May.
Chinese production in the six months to June rose 19% compared to the first half of 2007, but China's imports of copper and alloys dropped 19% last month from June 2007, a good indicator of current demand levels in the country where a power shortage is curtailing output of aluminium, lead, zinc and perhaps now copper. Comex September copper futures fell 4.6 USc to $US3.669 a pound on the New York Mercantile Exchange. The price fell 1.9% over the week after dropping 5.3% the week before.
The price of the September most-active futures contract has dropped 14% from a record $US4.2605 a pound set May 5 on concern that slowing global economic growth and declining consumption in China will lower demand.
