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Oil
Oil prices have risen in the days following Opec’s output reduction, boosted by talks of further cutbacks by the group and the threat of a strike in Nigeria. By October 3, the price of benchmark Brent North Sea crude oil for November delivery stood at $28.22 a barrel in London from $26.60 a week earlier.
In New York, the reference light sweet crude November contract climbed to $29.88 per barrel from $27.96. An Opec heads-of-state summit in 2005 might also discuss raising the Opec target price band, says Venezuelan Energy Minister after his president Hugo Chavez suggested the band should rise from $22-28 per barrel to $25.32. An increase in the Opec target price band would put upward pressure on the market, said Barclays Capital analyst.
Prices are up by nearly 12 per cent since Opec decided on September 24 to cut production by 900,000 barrels per day to 24.5 million bpd from November 1. A Reuters output survey showed Saudi Arabia cut production sharply in September to make room for growing Iraqi output, paving the way to reach the new, lower Opec production quotas, which shocked the market when they were announced.
Opec made its cut following a recent study by the cartel that showed large increases in crude inventories during the next two quarters, even though stocks in the US, the world’s largest oil consumer, are barely above the minimal levels required to keep its network of oil refineries and pipelines working efficiently.
Oil inventories could remain at relatively low levels because refiners or commercial users have no incentive to build stocks when prices on futures markets are such that they can sell crude at higher prices now than in forthcoming months.
Analysts also note that the expected increase in global oil consumption could be outweighed by the increase in oil production from non-Opec producers, in particular the former Soviet Union, and the drop in demand from Japan as more of its nuclear generating capacity returns to operation.
By the end of September, gold prices had risen to seven-year highs encouraging the traders to forecast bullion prices to break the $400 a troy ounce level. Spot gold prices vaulted by more than $6 to peak at $393.30 a troy ounce, a price not seen since May 1996. However, prices slipped to below September 24, levels to $385.05/$385.75 in early New York trade. The London afternoon fix was $390.70, the highest in seven years.
The market had been looking for a catalyst all week to break to new levels, and it chose the Opec cut as the reason to move higher, said Kamal Naqvi, precious metal analyst at Macquarie Bank Naqvi said the rise in oil prices following the Opec decision to cut 900,000 barrels a day sparked concerns that higher crude prices could stall economic recovery in the US. He said prices came off their highs following significant fund selling around the $390 level.
Gold prices have risen about 13 per cent since the start of August, helped by a weaker US dollar, and further aided by the Group of Seven industrial nations’ call this week for more flexible currency regimes.
Platinum prices have risen to a new 23-year peak amid speculation over future production at South Africa’s Anglo Platinum. Some analysts say the Anglo Platinum may slash its expansion plans by as much as a sixth as the stronger (South African) rand pushes a raft of planned projects into the red.
The SG Securities’ Briggs added that the Anglo Platinum had a lot of new mines coming on stream, but its expansion plans had fallen behind scheduled because of technical problems and a strengthening of the rand. By October 3, the platinum price stood at $726 per ounce on the London Platinum and Palladium Market against $698 a week earlier.
In the first week of October, cocoa prices slipped back somewhat after the previous week’s strong gains sparked by concern at potential unrest in number one producer Ivory Coast. The market had been worried about a possible resumption of the country’s civil war after rebels announced they were boycotting the unity government.
Last week, “there was no fundamental news and for the most part traders have absorbed the political disturbances in the Ivory Coast,” said Refco analyst Ann Prendergast.
On the LIFFE, London’s financial futures exchange, the price of cocoa for December delivery fell back to 957 pound a tonne on October 2 from 1,022 the previous week.
