IN the London market, oil prices rose above $64 a barrel as US crude stockpiles fell in the wake of Hurricane Katrina, a weekly data from the world’s top oil consumer showed the US commercial crude stockpiles fell 6.6 million barrels last week after Katrina forced the closure of most Gulf of Mexico oil output.
The fall was much larger than the 1.4 million barrels that analysts polled by Reuters had expected. Distillate stocks also fell more than expected, sliding 1.4 million barrels compared to forecasts for a fall of 0.2 million barrels.
But gasoline stocks were more bearish. Despite fear after the hurricane that the gas-guzzling US could suffer a gasoline supply crunch, gasoline stocks rose 1.9 million barrels. Analysts had expected a fall of 2.5 million barrels.
Refineries have moved production from other products to concentrate on gasoline over the past two weeks. However, the recovery in refining capacity post-Katrina could be slower than initially expected as the EIA said refineries increased utilization by 0.5 percentage points, against a forecast rise of 1.6 percentage points. Three refineries are not expected to return to production for several months.
Some analysts and investors expect the full force of Katrina may be reflected in statistics over the next few weeks. About 56 percent of the 1.5 million barrels per day (bpd) of the US oil production in the Gulf of Mexico is still off line two weeks after Katrina, government data shows. Evidence of waning demand growth due to soaring prices has helped drag crude down about 10 per cent from its $70.85 record a fortnight ago.
Analysts say the economic shock from the disaster and ensuing oil rally may curb the rapid growth in oil consumption that has doubled crude prices in the past two years.
Fears of a gasoline-supply crunch in the world’s top oil consumer have eased after emergency imports and the post-summer drop in demand. China, whose voracious oil import appetite took the world by storm last year, cut its August crude imports by 6.1 per cent from the year-ago period to their lowest levels in eight months at 2.06 million barrels per day.
Undermining prices further, the world’s No.2 oil consumer reiterated it would not use imported crude to fill newly constructed strategic reserves. Despite bearish market signs, dealers remained worried that a drawn-out recovery from Katrina will stretch supplies ahead of the peak demand during the northern hemisphere winter.
European governments were struggling to head off protests over soaring fuel prices and called on Opec to boost production. For its part, the oil cartel has raised crude output sharply over the past years, up more than four million barrel per day to about 30 million bpd, and is now operating close to full capacity.
Abu Dhabi, the Middle East’s fourth-largest oil producer, plans to increase output capacity at its biggest field by a third amid a global squeeze in spare capacity that’s helped spur oil prices to a record high.
The emirate, a member of the United Arab Emirates federation, is considering boosting capacity at its offshore Upper Zakum field to 750,000 barrels a day from about 550,000 now, said an official at the state-owned Abu Dhabi National Oil Company.
Adding capacity may help ease concern about the security of oil supplies by offering more of a cushion against disruptions. Global excess capacity may fall to a 14-year low of about 1.2 million barrels a day in 2005 on higher-than-expected demand from countries including China and the US, according to Samba Financial Group, Saudi Arabia’s second- biggest bank.
Gold
IN the London market, gold rose to its highest price in 17 years as political factors boosted the yen and knocked the euro, pushing the investors into the safe haven asset. Bullion rose to its highest so far this year at $451.50 an ounce.
An election victory by Japanese Prime Minister Junichiro Koizumi pushed up the yen against the dollar and boosted the interest of Japanese investors in dollar-priced bullion, dealers said.
Euro-denominated gold hit its firmest in three weeks as the European currency softened on growing uncertainty over an upcoming vote in Germany. Dealers said the metal was gaining strength and was likely to climb past the December 2004 peak of $456.75. Anything above that would take gold to its highest since June 1988.
A weaker dollar traditionally makes gold, which is priced in the US currency on world markets, more attractive to buyers using other currencies. Dealers also reported buying from jewellers in Asia despite high prices, suggesting that some consumers had given up hope that gold would fall back to July levels of around $420.
A recent industry sponsored report showed robust physical demand especially from Asian jewellery manufactures, in the first half of 2005.
The Commodity Futures Trading Commission, a US regulator, said the net amount of buying by investors on New York gold futures was up on the week at 14.9 million ounces, short of a recent record of 19.4 million.
John Reade, precious metals analyst with UBS Investment Bank said. This was reminiscent of a move in June, when euro-priced gold hit a record high after the euro was destabilized by the rejection of a European constitution.
Cocoa/Coffee
COCOA prices reached the highest level for two-and-a-half months on strong buying, after a report that forecast a smaller crop in the second biggest producer Ghana prompted buying.
Cocoa reached 894 dollars on September 8, the highest level since June 24, before cooling on profit-taking. Ghana’s cocoa output in the 2004-05 seasons currently stands at 520,000 tones and will fall short of 600,000 tones according to an official at the country’s cocoa regulator, Sucden analyst Michael Davies said.
On LIFFE, London’s futures exchange, the price of cocoa for December delivery rose to 880 pounds per tonne on September 9 from 877 pounds a week earlier. On the CSCE, the New York futures market, the December contract stood at $1.540 per ton on September 9, from $1.539.
Coffee prices sank after it was revealed that Hurricane Katrina failed to destroy the US coffee stockpiles. On LIFFE, Robusta quality for November delivery slumped to 962 dollars per tonne on September 9 from $1,016 a week earlier. On New York’s CSCE market, Arabica for December delivery dropped to 96.45 US cents per pound on September 9, from 103.90 cents.
COPPER
COPPER futures fell to a weaker close on Friday, as funds stuck to the light selling that characterized activity in the red metal all week, traders said.
The sharp drop in the US consumer sentiment reading pressured copper, already down because of the latest increases in exchange warehouse copper stocks, according to Reuters.
“It’s just general fund liquidation, but there’s really not a whole lot going on. Some people are trying to pick a range, some people trying to pick a top, but most of the activity has been in nickel, which means they’re ignoring copper,” said one copper trader.
At the New York Mercantile Exchange’s COMEX division, benchmark December copper was down 1.15 cents at $1.5930 per lb by the close, in a range that led to $1.5775, which marked its lowest level since Aug. 11. The high was $1.6075.
Spot September copper lost 1.70 cents to finish at $1.6730 in a range between $1.6550 and $1.6805.
COMEX estimated final copper volume at 17,000 lots, a pick up from Thursday’s tally of 12,440 lots.
Traders said funds have been gradually selling off long copper positions for more than a week to lock in profits, with the US and global economic outlook becoming cloudy following the battering by Hurricane Katrina.
