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| October 14, 2002 | Monday | Sha'aban 7, 1423 |
World commodity report
World oil prices have fallen in recent days after Russia joined France and China to oppose the US tough line against Iraq, making it look more difficult for the US to push for quick military action against Baghdad.
On October 3, the London Brent blend crude fell 29 cents to $28.53 a barrel and the US high crude eased 31 cents to $30.18. Russia, like France, said it wanted to rule out mention of the automatic use of force in a draft United Nations resolution on Iraq that the United States wants in order to pave the way for a possible military campaign.
“Attempts to make the UN Security Council subscribe to automatic use of force against Iraq are unacceptable for us,” Deputy Foreign Minister Alexander Saltanov said. The US now has the backing only from Britain on the five-member permanent Security Council, while the other countries are calling for the swift return of weapons inspectors to Baghdad under the existing UN agreements.
Only two days earlier, the world oil prices had risen towards 19-month highs on the threat of severe storm disruption to Gulf of Mexico oil and gas operations.
The US prices came within 35 cents of their highest level since February 2001 as the Gulf producers were forced to airlift crews and start shutting in production for the second time in two weeks as the Hurricane Lili bore down on the oil rich region.
The Shell Oil Company, the biggest Gulf producer, and other oil producers and port operators said they would shut in activities by as early as the day’s end due to the forecasts of strong winds and powerful waves from the Hurricane Lili.
Oil prices are up more than 40 per cent over the year, spurring fears that the steeper energy costs for consumers and businesses could thwart the economy’s move out of recession. The Opec oil group’s decision earlier this month to hold production quotas at the lowest level in a decade has helped run the US inventories down despite sluggish fuel demand in a shaky global economy. Traders are also awaiting concrete developments from talks in Vienna between the UN weapons inspectors and Iraqi arms experts aimed at warding off a full-scale military attack led by the US.
Cocoa futures climbed to 16-year highs on September 13, supported by the continued worries about a political turmoil in Ivory Coast, the world’s leading producer. The end-of-quarter book squaring and the arbitrage between New York and London contributed to the activity in the market, dealers said.
The Liffe December contract gained 9 pounds to settle at 1,519 pound a tonne, having reached 1,528 pound, its highest since October 1986. The second position March contract closed at 1,520 pound after an intra-day high of 1,537 pound. News of cocoa beans arriving at the Ivory Coast’s two main ports did little to allay the market’s supply worries.
Large quantity of cocoa beans has arrived in Ivory Coast’s two main ports since a rebellion shook the world’s largest producer on September 19. As Ivory Coast, the producer of 40 per cent of the world’s cocoa has been gripped by uprising, prices have risen. The London cocoa futures surged to 16-year highs.
Farm gate prices have risen in the past two weeks following soaring bean prices in London. Exporters were paying around 930 to 975 CFA francs ($1.39 to $1.46) per kg, up about 10 per cent from mid-September.
In the New York market, during week ended September 28-29, the commodity remained near 17-year highs trading at $2,167 a tonne, up $15 a tonne. Prices of the crop have jumped about 60 per cent since the beginning of this year as investors came to terms with the fact that the supplies of cocoa would be poor for the third year in a row.
Cocoa suffered two production deficits in a row as more than a decade of low prices led to low investment by farmers. The uprising in Ivory Coast has added fuel to an already raging fire. The war, investors believe, will lead to energy shortages, thus leaving both farmers and exports immobile and further disrupting supplies.
Meanwhile, the International Cocoa Organization has suspended its plans to relocate to Ivory Coast due to political unrest there. The ICCO would wait till the political situation improves. Cocoa prices have continued to rise and more recently these rose to fresh 16-year high of 1565 pound a tonne.
Nickel, used in the production of stainless steel is likely to sustain its strength in 2003, says analyst from the Macquarie Research. The metal is likely to rise in 2002, with the cash prices averaging about $3 a pound, some 10 per cent higher than in 2001.
Demand growth is seen underpinning the metal’s price. Macquarie is projecting: ‘World nickel consumption will grow by 6.5 per cent this year to 1.18 million tonnes’. On the supply side, Russia’s Norilsk, the largest nickel produce, started selling less and stockpiling more in 2000 and 2001, as the market deteriorated.
On October 9, platinum prices rose to $581 an ounce in the London market, a price not seen since June 21, 2001 when platinum group metals were near the peaks led by surging demand for the use in automotive catalytic converters.
Meanwhile, gold firmed at $319.35 as a stronger euro against the US currency made dollar denominated gold more affordable for the European investors and fabricators.
Platinum group metals are used in to reduce pollutants from vehicle exhausts. But the rally this week comes as the automobile makers are developing technology to reduce their dependence on the metals, after years of export disruptions from Russia, which accounts for about a fifth of all platinum and two-thirds of global palladium supply. Spot platinum traded at $581.50/572.90 an ounce, again hitting its costliest since June 2001.
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