June 05, 2006	Monday	Jumadi-ul-Awwal 8, 1427

Oil

THE Organization of Petroleum Exporting Countries (Opec) at a meeting in Caracas, Venezuela decided to leave oil quotas unchanged and keep pumping near full capacity, rejecting a suggested supply cut by host Venezuela.

Opec worries that a $70 a barrel crude could backfire on it by slowing global economic growth and fuelling investment in alternative energy.

In the London market, oil rose above $72 a barrel on May 30, boosted by a jump in demand from energy-hungry China and continued tension between Iran and the West over Tehran’s nuclear programme.

Gold, silver and other precious metals also gained as investors moved back into the market after recent price weakness. A flow of money from investment funds has helped send the price of many commodities to record or decade-highs in 2006.

Oil in New York has fallen from its record high of $75.35 reached in April partly on worries that high prices will accelerate inflation and low growth in demand for oil. But demand in China, the world’s second largest consumer, remains robust, calculations based on official data showed. China’s apparent demand climbed 10.8 per cent in April from a year earlier, the highest rise since 2004. The world’s second-largest oil consumer used 6.69 million barrels per day (bpd) last month, despite a fall in crude imports as refiners shunned soaring global markets.

Car sales soared by almost half over the first four months of the year, helping drive a 20 per cent rise in demand for gasoline — which powers the vast majority of private cars in China — to around 1.2 million barrels per day (bpd) in April.

Fuel price caps have insulated China’s drivers from the full brunt of rising global crude markets, so the modest 3 to 5 per cent price rise in March offered middle class car owners little incentive to trim use. More price sensitive users, from farmers and fishermen to taxi drivers, have been insulated by government subsidies.

There are also concerns about hurricanes, and the demand increases for motor fuel as the US summer driving season begins.

Crude futures were supported also by bubbling tensions over Iran — the world’s fourth largest producer of oil. In a volatile week of trading oil prices staged a sharp rebound on May 23 after US experts predicted a packed summer season of Atlantic hurricanes.

As many as 10 Atlantic hurricanes could form in coming months, and up to four of them could hit the United States, the US National Weather Service said in a report released recently.

The report said the six-month Atlantic hurricane season, which starts on June 1, is unlikely to reach the records set last year, when there were 28 tropical storms, 15 of which strengthened into hurricanes.

Seven of the hurricanes were considered “major”, and four of those slammed into the US coast. Robert Latham, who heads the Mississippi Emergency Management Agency, said a hurricane more devastating than Katrina, which killed over 1,500 people in New Orleans and along the US Gulf Coast last year could not be ruled out.

Katrina and a follow-up hurricane called Rita ravaged US oil facilities along the coast and in the Gulf of Mexico, sending crude futures to then-record highs.

Copper

Copper has been at the forefront of the commodity market. During the week ended May 27-28, copper prices rose more than 7 per cent in the week. The 3 month LME copper price was quoted at $8252 a tonne, in late trade on May 26, up more than $150 on the day. It recorded the largest single day rise, when the metal raised $940 on May 24. Copper is about 6 per cent below its record of $8790 a tonne set more than 2 weeks ago.

Codelco, the world’s largest copper miner, has warned production would fall by 6.5 per cent this year. It also cut its long term annual target to 2.5 million tones by 2020. Previously the company had said it aimed to produce 3 million tones by 2015.

A commodity strategist and HVB warned copper prices could drop 20 per cent to $6,600 a tonne as slowing growth in construction hurt demand.

Gold

GOLD prices have eased from a 26-year historic high of $850 reached in January 1980. Metal prices had slumped on concerns that expensive commodity prices were spiking inflation, which in turn can weigh on economic growth.

The World Gold Council reported last week that global demand for the metal dropped by 16 per cent in the first quarter of 2006 as jewellery buyers were discouraged by gold’s high price.

Demand for gold in tonnage term sank to 836 tonnes during the first three month of the year, compared with 990 tonnes in the same period of 2005. On the London Bullion Market, gold prices slipped to $642.25 per ounce on May 26, from 651.20 dollars a week earlier.

Meanwhile, palladium and platinum prices were mixed. Platinum prices struck a record high $1,340 per ounce on May 12. The metal has been bolstered by strong demand from the car industry, which uses the metal in catalytic converters.

Palladium has enjoyed keen interest from the Chinese jewellery sector fell also in price this week. Palladium had on May 12 topped $400 per ounce for the first time in more than four years.

On May 26 on the London Platinum and Palladium Market, platinum slipped to $1,286.50 per ounce at the late fixing on the day from $1,302 the previous week. Palladium crept up to $346.50 per ounce on May 26 from $345 the previous week.