Oil In the recent days oil prices sagged, as the buying frenzy for heating oil eased, but remained above the US $54 mark. Much of the upward kick of the past few days has been attributed to fears that the US refineries may not be able to cope with increased demand for heating oil in the second half of the year, when winter arrives in the Northern Hemisphere. But some analysts said the trend — and the focus on heating oil — was purely speculative.
Oil prices have resumed their climb in recent weeks on fears that the heating oil supplies could be insufficient next winter as refiners strive now to meet strong demand for gasoline and diesel. The fears of heating oil supplies are serious, but the demand for distillates and heating oil continues to be steady.
The US light sweet crude was trading 13 cents weaker at $54.90, down from a session peak of $55.55, which was the highest level since April 25. London’s Brent crude futures shed 22 cents to $53.95 a barrel, also easing from a six-month peak.
Distillate products, including heating oil and gas oil, which had led gains also eased from recent peaks. The US heating oil shed 0.15 cents a gallon to $1.5980. It still holds a rare premium of more than five cents to the US gasoline, reflecting trader concern distillate inventories are less adequate than gasoline and overall stocks.
Last week’s US inventory data showed a surprise 700,000 barrel fall in the US heating oil stocks, helping to sustain a rally on the US sweet crude futures to the highest levels since late April and marking a nearly 20 per cent rally from a low of $46.20 touched on May 20.
Opec is to meet in Vienna next week, where the cartel may decide to increase its formal quotas, but raising the ceiling would not affect actual output because members are already pumping above official limits.
Overall the US crude stocks are near six-year highs, boosted by the steepest production from the Organisation of the Petroleum Exporting countries for 25 years. This has led some Opec ministers to caution against raising their output ceiling, despite the fact prices are within sight of a record high of $58.28 for the US crude hit at the start of April.
The Energy Information Administration has trimmed Chinese oil demand, forecasts for the second quarter of 2005 by 200,000 barrels a day to 7.2 million barrel per day but raised its estimates of an increase in Chinese oil demand for 2006 to 600,000 b/d from 500,000 b/d.
The EIA announcement had little effect on crude oil futures, which were more influenced by market expectations of release of the US crude inventory report, and on the outcome of the production policy decision at next week’s meeting of the Organisation of the Petroleum Exporting Countries in Vienna.
Aluminium
There has been a considerable increase in the international price of aluminium. This has increased from $1662 per tons to $2079 per tons. According to international forecasts, the international aluminium market will continue to face a supply shortage in 2006 resulting from high demand for aluminium, and hence price is expected to continue on the upswing.
There are four major aluminium factories in the Middle East spread among the UAE, Bahrain, Iran and Turkey. Middle East aluminium production remained low, although increasing from 1.18 million metric tons in 2000 to 1.3 million metric tons last year, with a total increase of 11.4pc in the said period.
Therefore, being a small player in the international aluminium market, the Middle East market is affected by the former, in which supply shortages are exerting upward pressures on prices
Copper
Copper prices climbed to their highest in almost a month on June 3, a day after gaining 2.6 per cent as stocks in London Metal Exchange warehouse sank to their lowest in more than 30 years.
Stronger-than-expected demand had helped copper shrug off a firmer dollar this week, and further buying during the coming sessions would see the market first target $3,260-300 a tons and then $3,336, the record high of April 12, dealers said.
A combination of scant warehouse stocks and run of tight dates for prompt copper delivery underpinned backwardations, or premiums, over the cash price. When inventories are low, price squeezes and technical shortages become more frequent. The benchmark cash-to-three month’s rate was steady at around $200.
Almost 1,000 tons left the London Metal Exchange (LME) warehouses on June 3 after more than 1,000 the day before, dragging total stocks down to 42,275 tons — a third of year-ago levels and the lowest since July 1974 when the total was 38,300. Asian traders said the market had been supported by stop-loss buying, but that investment funds were building fresh positions on copper, expecting it to rise again.
In the recent days oil prices sagged, as the buying frenzy for heating oil eased, but remained above the US $54 mark. Much of the upward kick of the past few days has been attributed to fears that the US refineries may not be able to cope with increased demand for heating oil in the second half of the year, when winter arrives in the Northern Hemisphere. But some analysts said the trend — and the focus on heating oil — was purely speculative.
