January 12, 2003	Sunday	Ziqa'ad 8, 1423

LONDON, Jan 11: Oil prices fell back this week after Opec oil ministers signalled they were ready to pump more oil to ward off an oil price spike threatened by a strike in Venezuela and the spectre of a war in Iraq.

But prices later recouped much of the losses amidst worries that crude will remain in short supply even after the extra crude eventually hits the market.

Gold streaked up to a new six-year zenith as the prospect of a war in Iraq loomed large and the dollar retreated.

Base metals also fared well thanks to rays of optimism spied in US economic data and strong demand for bellwether copper.

OIL: Oil prices endured another volatile week, falling back sharply initially on signs Opec members were set to pump more crude in response to recent price rises, before subsequently making up most of the lost ground.

On Friday, the price of benchmark Brent North Sea crude oil for February delivery stood at $29.88 a barrel, against $30.22 a week earlier.

In New York, February-dated light sweet crude futures traded at $31.99, down from $32.57 a week earlier.

Oil prices were hit as speculation mounted that members of the Organization of Petroleum Exporting Countries were set to sanction an increase in their combined output quota of between one and two million barrels per day at a meeting in Vienna on Sunday.

Such a move would be a response to the recent rise in oil prices, which have shot up to $30 a barrel or more, well above the upper end of the cartel’s target price band of $22 to $28.

Weekly estimates of US oil stocks, which showed a rise in stocks in contrast to the sharp drop analysts were expecting owing to severe recent disruptions to Venezuelan supplies, piled more pressure on the market.

But prices soon resumed their upward trend after analysts suggested the rise in US stocks would probably prove to be a one-off.

They said that even if Opec members were to agree to hike output, the chances were this would come too late to avert a temporary shortage in global supplies.

“We believe that world supplies will be insufficient to meet world demand this month and possibly throughout February as well,” said Lawrence Eagles, analyst at the brokerage firm GNI.

“The gap will not be huge, but with world oil stocks at low levels this will represent a significant tightening of the world oil market,” he added.

Analysts said that it already appeared as if other oil producing nations had been only too willing to furnish the US market with increased supplies to make up for reduced Venezuelan deliveries.

And they warned that while that had alleviated supply shortages in the United States, the likelihood was that it had resulted in a drop in stockpiles held elsewhere in the world.

GOLD: Gold prices charged up to new high points not seen for almost six years as a US build-up for possible war in Iraq sent investors piling into safe-havens and bore down on the dollar.

Gold prices rose $356.10 per ounce at the start of the week on the London Bullion Market, the highest fixing since March 1997.

By Friday afternoon, an ounce of the precious metal was fixed at $353 per ounce against $344.5 the previous week.

“Funds are very long gold at the moment, but I think in this environment, with the dollar continuing to weaken and continued concerns of war and/or terrorism, they’re going to be pretty comfortable holding on to these long positions in gold,” he added.

SILVER: Silver prices rode higher on the back of gold and base metals, benefitting from its dual role as a precious and industrial metal.

“Silver’s been supported I think by the same sentiment as gold,” said Reade. Silver was fixed on the London Bullion Market at $4.84 an ounce on Friday afternoon against $4.785 the previous week.

PLATINUM AND PALLADIUM: The platinum group metals prices also forged ahead, boosted by supply concerns.

Reade said that platinum and palladium prices had been driven by different factors than the other precious metals.

“The biggest news there was from Lonmin, the fourth-largest platinum producer in South Africa, which announced that they had had problems with their smelter ... and that they would be suffering some production interruptions as a consequence.”

Lonmin announced that an accident had occurred at a furnace at the Western Platinum smelter in South Africa on December 26, 2002.

An explosion caused serious damage to the furnace, which has been taken off-line for further investigation, the group said.

By Friday, an ounce of platinum had firmed to $618 on the London Platinum and Palladium Market from $603 the previous week.

“The platinum market is extremely tight at the moment with lease rates continually well above those of the other metals,” said Reade.

Palladium rose to $267 per ounce from $236.

BASE METALS: Base metals prices rose in response to glimmers of hope seen in US economic data and strong demand for market leader copper.

“I think coming into the new year people have seen a few economic data, not many, but they’ve generally been a little bit more encouraging, particularly for the US,” said Macquarie Bank analyst Adam Rowley.

“There are also specific issues in individual metals. For example copper, which is often seen as the bellwether of the exchange, has experienced very strong buying out of China over the past week or two,” he added.

Nickel was also ahead of the pack thanks to investment fund buying, trade short-covering and some panic buying by consumers, traders said.

On the London Metal Exchange (LME), three-month copper prices rose to $1,642 per ton from $1,607 the week before.

Three-month nickel prices rose $410 per ton to $7,910 per ton.—AFP