Oil Prices Up, but Commodity Index Hits 26-Year Low
Crude oil prices ended higher Monday after seeing their lowest levels in 12 years, but soybeans, hogs, sugar and cotton all ended lower--leaving the Commodity Research Bureau commodity price index at a new 26-year low.
The index ended down 0.1% at 194.87, its lowest since 1972.
The ongoing slide in many commodity prices--the result of a glut in global production while demand, especially in Asia, has weakened--has meant a bonanza for Western consumers, but is hammering commodity-producing nations.
Beleaguered oil prices, however, finally found some support late Monday after Saudi Arabia’s Crown Prince Abdullah called on oil producers to take further measures to stop oil’s slide.
“We should not remain with our hands tied behind our backs when we see our main source of revenue drying up by the collapse in demand and over supply, “ Abdullah said, speaking at a meeting of Gulf Arab leaders.
Oil also was helped by speculation that Venezuela, which produces about 4% of the world’s supply, will cut output to prop up prices when its new president takes office. Hugo Chavez, who won a landslide victory Sunday, said Venezuela “must accept reality” and abide by its promises to cut.
On the New York Merc, crude oil futures for January ended 30 cents higher at $11.47 a barrel, after seeing a new 12-year low of $10.82 last week.
Earlier in London, Brent crude oil for January slipped to a new 12-year low of $9.90 a barrel before ending higher.
Still, “there is no doubt that fundamentals remain sloppy [for crude oil] on high inventories, poor Asian demand and doubts about OPEC,” said John Saucer, an analyst with Salomon Smith Barney. “But we could strongly argue that much, if not all, of the negative news is already well-discounted into prices.”
The latest meeting of the Organization of Petroleum Exporting Countries last month failed to produce an agreement on new production cuts or whether to extend the current agreement to cut 2.6 million barrels per day beyond June.
In other trading Monday:
* Soybean futures in Chicago fell on the outlook for better crop weather in Brazil. Soybeans for January delivery lost 5.5 cents to $5.76 a bushel.
* Hog futures in Chicago plunged 7% to a 24 1/2-year low of 25.2 cents a pound on speculation that meatpackers will buy fewer animals this week because they’ve still got ample supplies--even after a near-record slaughter last week.
* Coffee, Sugar and Cocoa Exchange raw sugar futures for March ended down 0.14 cent at 8.10 cents a pound in New York.
Trade house ED&F; Man said last month that the world sugar surplus is poised to grow to 4.34 million metric tons in 1998-99 from a revised 3.55 million tons in 1997-98.
* Cotton for March delivery ended down 0.38 cent at 63.22 cents a pound. With U.S. cotton prices well above foreign prices, traders figure that “U.S. cotton prices will decline,” said Walter Spilka, analyst with Salomon Smith Barney.
