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World oil prices have risen to their highest levels in recent days, driven by concerns about low US inventories and supply shortfalls from Iraq. US benchmark crude oil futures jumped 46 cents to $32.85 per barrel, its highest since mid-march when Washington was gearing up for war on Baghdad. International Benchmark Brent crude gained 32 cents to $30.57, close to its post-war high.
In New York, the light sweet crude September contract rose to $32.75 per barrel from $31.08. Worries about the low level of US inventories as winter edges nearer in the northern hemisphere also kept prices well bid.
The US government said inventories of gasoline had declined 2.7 million barrels, or 1.3 per cent, the previous week and “are now well below the normal range for this time of year.”
Commercial stores of crude oil swelled 2.9 million barrels, or 1.0 per cent. “Now we are headed for the winter. We are just not building fast enough,” said Energy Ventures Analysis market analyst Stephen Thumb.
Prices fell sharply after the start of the war in March, but have since recovered as occupation powers failed to meet expectations in reviving Iraq’s oil exports. Baghdad was able to pump 2.8 million barrels per day before the US-led invasion, and has only achieved about half that rate in the past week.
Opec oil ministers agreed only last week to leave supply quotas unchanged despite prices at the top of their target range. Since the agreement, Opec’s reference basket of crude oil has broken the top end of the group’s $22-$28 per barrel target range, standing at $29.07 on August 7, a signal that the group may raise quotas.
Gold prices have moved up driven by signs of weakness in the US dollar and renewed terrorist worries after bomb blasts in Indonesia and Baghdad. On the London Bullion Market, the price of an ounce of gold stood at $353.95 on August 8, against $352.35 the previous week.
Dollar weakness has given the gold market a boost after a stronger euro and silver prices, together with the bomb attack on the Jordanian embassy in Iraq encouraged fresh buying, said James Moore at specialist website The BullionDesk.com.
South African miner Anglo Gold has agreed to buy Ghana based rival Ashanti Goldfields for $1.09 billion (965 million euros). AngloGold said the merged group would be the biggest in the world in terms of gold reserves, with production on a par with US giant Newmont after a 27 per cent boost from Ashanti.
Lonmin, which owns 27.6 per cent of Ashanti, has agreed to support the merger bid, which values Ashanti Goldfields at $8.36 per share. The deal is dependent on the approval of the government of Ghana.
AngloGold said the offer represented a premium of about four per cent on Ashanti’s closing price on the New York stock Exchange on August 1. On completion of the deal, existing AngloGold shareholders will own about 87 per cent of the merged company and existing Ashanti shareholders will hold around 13 per cent.
Wheat prices have risen in recent days in many parts of Europe, as the heatwave cuts continental crop estimates, putting pressure on other wheat markets. France, western Europe’s largest wheat producer, has reduced its crop estimates by 15 per cent, while Italy has said its harvest will be the worst in five years.
Hot, dry conditions are also behind the collapse in crops in Ukraine and Russia. Soaring temperatures have had a lesser effect on crops in northern Europe. Britain is expected to produce about 15 million tonnes this season, slightly down on last year, but that has more to do with a reduction in the amount of land planted than the heat.
The projected fall in European wheat production has cast doubts over its ability to enter the near-100 million tonnes a year international export market, leaving North America to dominate. Demand for US wheat has helped push up wheat prices on the three main wheat futures markets; Chicago, Kansas and Minneapolis.
Base metal prices headed lower with news of a probe into the aluminium market and a labour dispute at the world’s biggest copper mine causing some jitters. The London Metals Exchange announced it would look at possible collusion among traders in the aluminium market. The LME said it would scrutinize inventory levels, individual trading patterns and the price curve.
Traders said the LME system of daily delivery pricing has enabled a buyer to tie up metal for a specific delivery period, leaving little or none available for the open market during that time.
Spot aluminium prices are about $40 above the key three-month LME price of $1,435, a margin that has held for most of the week, but down from the $70 gap reached last week. Higher cash prices than forward delivery prices is known as backwardation.
There is nothing unusual about metals markets in backwardation, but it usually occurs when there is a shortage. However LME aluminium stockpiles are near eight-year highs at more than 1.3 million tonnes, with about 200,000 tonnes added since the start of June, and demand remains sluggish.
