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| March 3, 2003 | Monday | Zul Hijjah 29, 1423 |
World commodity report
In the New York market oil prices rose to nearly $40 a barrel on February 27, for the first time since the 1990-91 Gulf War as war clouds loomed over Baghdad. A war in Iraq could be just around the comer, threatening disruption to Middle East supplies, while the US oil stocks are close to 27 year low. Traders are worried about the possible loss of Iraq oil, while stocks of the US crude oil and heating fuels are reaching low levels, analysts said. Low stocks of heating oil in the world’s largest consumer have run up against a cold spell forecast to continue, drawing in urgently needed imports from across the ocean.
Traders said tankers were lining up to load vital barrels from Baltic ports, pumped from Russia, the world’s second oil exporter and an emerging supplier to the US. Traders were also looking ahead to the March 1 UN deadline for Iraq to begin destroying banned al-Samoud missiles and show it is cooperating with demands to disarm, and March 7, when the head of UN weapons inspections Hans Blix is due to give his next report.
Oil markets fear an attack in Iraq, the world’s eighth biggest exporter shipping roughly two million barrels of crude a day, may spread to other producers in the Middle East. The Middle East supplies about 40 per cent of globally traded crude.
The US heating oil futures soared to their highest in more than 23 years, reaching $1.1525 a gallon, following the run down in inventories due to the Venezuelan oil strike and the cold winter in the US northeast, the nation’s biggest user of heating oil.
The prospect of war in Iraq has prompted several investment banks to revise their oil price targets upwards for the rest of 2003. Despite the rising oil futures, speculative interest in Nymex crude and oil products fell two week back with fewer positions held at the end of last week, versus the previous week.
Apart from the threat of an attack on Iraq, prices have been driven by continued disruptions to oil exports from strike-bound Venezuela and possible interruptions to crude flows from Nigeria as oil workers down tools in a dispute over pay and conditions. Before its general strike, Venezuela was fifth in world oil exporter rankings, while Nigeria is seventh and Iraq eighth. “Until the situations in Iraq and Venezuela are clarified, oil prices are going to stay high and getting inventories rebuilt is not going to be easy,” said Adam Sieminski, analyst at the Deutsche Bank.
Releasing its weekly US fuel supply assessment on February 20, the Energy Information administration (EIA) said overall crude stocks had unexpectedly risen by 3.1 million barrels to 272.9 million, recovering from their lowest levels since 1975. But freezing weather in the US Northeast caused distillate stocks to drop by 4.6 million barrels, with heating oil supplies down 2.1 million barrels.
Gold prices have stabilized with the market claiming some of the losses sustained earlier, aided by a weaker US dollar and ongoing worries about the prospects of a war in Iraq. Gold prices had fallen on February 17, extending losses to about 10 per cent in just over two weeks, on a slight easing of war fears, a dollar rebound and selling by investment funds. The subsequent recovery came amid signs that the US was stepping up preparations for war.
An analyst at the Barclays said gold was likely to remain volatile, while political uncertainty prevails. By the afternoon of February 21, the precious metal was trading at $352.30 per ounce on the London Bullion market, down from $354.25 the previous week.
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