(MENAFN- Gulf Times) Crude oil and metal prices drifted lower last week as markets took their cue from supply and demand patterns as well as uncertainty over Greece's eurozone future.
Eurogroup head Jeroen Dijsselbloem was working overtime Friday to save a make-or-break meeting on Greece's demand to ease its bailout programme as Germany insisted it stick with its austerity commitments.
After days of sharp exchanges, the 19 eurozone finance ministers gathered for the third time in little over a week to consider Athens' take-it or leave-it proposal to extend an EU loan programme which expires this month.
Time is pressing to find a solution before the current bailout programme ends this month, for fear that failure could see Greece run out of money and forced out of the eurozone within weeks.
"Thinking about the impact on commodities, the initial turmoil caused by 'Grexit' would surely boost safe-haven demand for gold while undermining the prices of assets perceived to be riskier, including oil and industrial metals," Capital Economics research group said in a note to clients.
OIL: Prices slipped as news of record-high US crude stockpiles offset weak Libyan supplies.
Traders sold off crude on Wednesday on forecasts of a huge jump in US inventories. They extended the losses Thursday after the Energy Information Administration confirmed a weekly surge in US commercial crude stockpiles to levels not seen since records began in 1982.
Tony Nunan, risk manager at Japanese trading house Mitsubishi Corp, said that although the increase was above market expectations, "the gain was a lot smaller than the number announced Wednesday by the (private) American Petroleum Institute in its weekly report."
He added: "Traders are watching when the gap between oil production and (demand) will narrow."
Crude prices lost around 60% of their value to about $40 between June and late January owing to an oversupply in world markets, a weak global economy and a strong dollar that made oil expensive to purchase for holders of rival currencies.
And while they have been climbing in recent weeks on news that the number of US oil rigs in operation has fallen and energy giants are cutting back on investment, markets-watchers say volatility is likely to continue for some time.
Phil Flynn of Price Futures Group said that largely offline supply in Libya was also supporting oil prices.
Infighting and sabotage in Libya has reduced output to 150,000 bpd, down from a high of almost 1.5mn bpd, he said.
Flynn said the beheading of Christians in Libya by militants affiliated with the Islamic State group showed the threat from the Islamist extremists is expanding.
"Risk premium in oil may start to come back and the glut of oil may tighten faster than many people think," he noted.
Meanwhile booming US output from shale rock, which helped spark slumping oil prices, will continue over the next 20 years but start to slow, increasing demand for Opec crude, BP forecast Tuesday.
The British energy giant revealed its verdict in an annual global Energy Outlook report which covers the period 2013-2035.
By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in April fell to $60.69 a barrel from $61.19 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for March dropped to $51.16 a barrel from $52.70.
PRECIOUS METALS: Gold fell over the week despite winning support from the Greek situation and minutes from the Federal Reserve's January meeting that portrayed a central bank more dovish on interest rates than thought, traders said.
The record of the January 27-28 policy meeting showed the Fed policymakers inclined to wait longer to begin hiking interest rates.
By Friday on the London Bullion Market, the price of gold dropped to $1,208.25 an ounce from $1,235.50 a week earlier. Silver slipped to $16.34 an ounce from $16.80.
On the London Platinum and Palladium Market, platinum decreased to $1,166 an ounce from $1,201.
Palladium dipped to $783 from $786 an ounce.
BASE METALS: Base or industrial metal prices mostly retreated in quiet trade owing to the Lunar New Year, while Greece weighed also.
"The market will be keen to gauge the mood in which Chinese participants return to work later this month," said analysts at Unicredit.
"The other big issue is Greece. The market perception is that the possibility of a Greek exit from the eurozone has been brought much closer by recent events and if this outcome materialises it has the potential to cause chaos across financial markets.
As a result, risk appetite has been sapped."
By Friday on the London Metal Exchange, copper for delivery in three months fell to $5,679 a tonne from $5,717.50 a week earlier.
Three-month aluminium slipped to $1,810.50 a tonne from $1,847.
Three-month lead dropped to $1,776.50 a tonne from $1,840.
Three-month tin grew to $17,880 a tonne from $17,445.
Three-month nickel declined to $14,130 a tonne from $14,710.
Three-month zinc slid to $2,058 a tonne from $2,105.
COCOA: Prices extended gains on tight supply concerns in West Africa, hitting four-month highs in New York at $3,028 a tonne.
"Prices were higher again as hot and dry Harmattan winds affected West Africa," said Jack Scoville, analyst at Price Futures Group.
The dry Harmattan wind-a dry breeze packed with dust which blows across West Africa from the Sahara-has blown away leaves and flowers which develop into cocoa fruits.
West Africa's Ghana and Ivory Coast are the two biggest producers of the commodity that is used mainly to make chocolate.
By Friday on LIFFE, London's futures exchange, cocoa for delivery in May stood at £2,007 a tonne compared with £1,970 for the July contract a week earlier.
On the ICE Futures US exchange, cocoa for May climbed to $2,987 a tonne from $2,930 the previous week.
SUGAR: Prices retreated on profit-taking, according to Scoville.
By Friday on LIFFE, a tonne of white sugar for delivery in May dipped to $388 from $391.40.
On ICE Futures US, unrefined sugar for May dropped to 14.67 US cents a pound from 14.84 US cents.
COFFEE: Prices dropped with support coming from rainfall in major producer Brazil.
"Further rains across key growing areas of Brazil and the highest January production in Colombia since 2008 have helped push the price of Arabica coffee to its lowest level in a year," Capital Economics said.
By Friday on ICE Futures US, Arabica for delivery in May slid to 153.80 US cents a pound from 166.15 cents a week earlier.
On LIFFE, Robusta for May eased to $1,989 a tonne from $2,022.
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