Vol. 5 Num 923 Sun. December 31, 2006  

Commodities mixed at end of record-breaking 2006

Crude futures tumbled in a mixed week for commodities, at the end of a year in which many raw materials saw their prices strike record highs.

Despite light, sweet crude reaching an all-time peak of 78.40 dollars per barrel in New York during July, its price actually ended 2006 down compared with a year earlier.

Commodities generally saw their prices excel for a fifth straight year during 2006, with most striking all-time highs on the back of strong investor demand, which many analysts do not expect to continue in 2007.

The Commodities Research Bureau's index of 17 commodities fell to 306.45 points on Friday at about 1530 GMT, from 308.89 points a week earlier.

GOLD: Gold prices rebounded this week from a seven-week low.

Gold tends to benefit from geopolitical tensions owing to the metal's safe-haven status.

Gold prices climbed 23 percent in 2006.

On the London Bullion Market, gold prices jumped to 632 dollars per ounce at Friday's morning fixing, from 619.75 dollars one week earlier.

SILVER: Silver prices advanced close to 13 dollars per ounce.

Silver prices had struck a near eight-month high of 14.18 dollars per ounce on December 5. The metal rose by 45 percent in 2006.

PALLADIUM AND PLATINUM: Palladium and platinum edged lower.

Palladium prices jumped 28 percent in 2006, while platinum gained 16 percent over the year.

BASE METALS: Base metals prices mainly rose, led by tin which struck the highest level for 17 years.

The price of tin broke multi-year high points owing to expectations of a supply deficit in 2007 caused mainly by a drop in Indonesian output.

The price of tin has risen by about 79 percent in 2006.

Expectations of a deficit have meanwhile been fuelled by a recent move by Indonesian authorities to shut about 20 illegal tin smelters.

Indonesia is the world's second-biggest tin producer, behind China.

Meanwhile copper prices fell this week amid news that demand for the metal in China, the world's largest consumer of copper, is likely to fall seven percent this year to 3.4 million tonnes, the first decline so far this decade.

Base metals have soared to record and multi-year highs in 2006 on a combination of strong demand by investment funds amid robust economic growth in China, as well as output disruptions.

Nickel led commodity price rises in 2006, rocketing 150 percent. Zinc meanwhile soared 122 percent over the year.

OIL: World oil prices tumbled briefly below 60 dollars per barrel in New York on Friday as the market focused on the US mild winter, rather than unrest in oil-producing nation Iran or news of a huge drop in stockpiles of US crude.

"The markets seem to have assumed a year-end liquidation mode with a singular focus on weather," Fimat analyst John Kilduff said.

The DoE report showed that levels of distillate products, which include heating oil, increased 500,000 barrels to 133.6 million over the week, in line with most forecasts.

Oil prices had meanwhile rocketed to record high points above 78 dollars per barrel during the northern hemisphere summer owing to unrest in the oil-rich Middle East and supply disruptions.

However they have since tumbled, with light, sweet crude down about 1.5 percent since the start of 2006 and Brent crude up only 2.0 percent over the year.

RUBBER: Rubber prices jumped for a second week running to reach the highest points since August.

On TOCOM, Tokyo's commodity exchange, natural rubber for May delivery advanced to 249.10 yen per kilogram on Friday, from 233.30 yen a week earlier.

COFFEE: Coffee prices rose close to recent highs. London Robusta coffee futures gained ground "on fund and trade buying on strength in New York", Davies said.

"New York Arabica coffee futures were stronger on speculative and fund buying, but with little fundamental news to justify" the move higher, he added.

Robusta's price jumped 36 percent in 2006, while Arabica gained 17 percent over the year.

SUGAR: Sugar prices fell slightly during a quiet week's trading.

"The tone of the market went from stable to disappointing," Fimat analyst James Cassidy said.

Davies of Sucden said the market remains under pressure from expectations of a global supply surplus in 2006/07.

GRAINS AND SOYA: Grains and soya prices mostly advanced.

AG Edwards analyst Victor Lespinasse said prices were being supported by expectations that there will be a big wave of fund buying at the beginning of 2007.

"It usually happens in the beginning of the year and no one wants to be short," he said.

In Chicago trade, maize prices surged 81 percent in 2006, while wheat jumped 49 percent and soya rose 11 percent over the year.

Maize for March delivery climbed to 3.90 dollars per bushel on Friday, from 3.78 dollars the previous week.

January-dated soyabean meal -- used in animal feed -- jumped to 6.76 dollars on Friday, from 6.53 dollars the previous week.

COTTON: Cotton prices gained further as the market awaited more Chinese buying. The Cotton Outlook Index of physical cotton stood at 59.75 US cents on Thursday, from 59.40 cents a week earlier.

WOOL: The Australian wool markets, shut over the festive holiday period, reopens on January 8. The Eastern index had stood at 8.39 Australian dollars per kilo on December 14.

WHEAT: Wheat prices jumped 33 percent during 2006.