August 28, 2006	Monday	Sha'aban 3, 1427

OIL

IN the London market, world oil prices rose on August 25 on supply concerns caused by the threat of a tropical storm near the US and fears that Iran may disrupt exports if hit by economic sanctions over its disputed nuclear programme, analysts said.

In London, Brent North Sea crude for October delivery climbed 60 cents to $73.28 per barrel. New York’s main contract, light sweet crude for delivery in October, advanced 69 cents to $73.05 per barrel in pit trading.

In the preceding week, on August 18, prices sank around $4 to reach two month lows. New York crude fell below the $70 mark on August 18 to lows last seen on June 21. News of the Middle East truce on August 14 made traders reassess their fears of a wider regional conflict affecting oil shipments.

Added to the picture, the market was calmed by news that BP would continue pumping 200,000 barrels per day at the Prudhoe Bay oilfield, which normally makes up eight per cent of total US production.

Losses increased after a series of US economic releases confirmed a slowdown in the US economy, which dampened prospects for crude demand because the United States is the world’s biggest oil consumer, dealers said.

And the Organisation of the Petroleum Exporting countries (Opec) cut its forecast for world oil demand by 80,000 barrels per day. The 11-nation group said demand would average 84.5 million bpd in 2006.

Analysts have trimmed their output forecasts for oil producers outside the Opec group this year after BP shut down half of the largest oilfield in the United States The consensus forecast for non-Opec oil output growth this year now stands at 920,000 barrels per day (bpd), a drop of 200,000 bpd since the last survey in June.

Countries outside Opec pump about 60 per cent of the world’s oil. When non-Opec underperforms, the Organisation of Petroleum Exporting Countries has to step in to help meet global demand of about 85 million bpd and keep prices in check.

US oil hit a record $78.40 a barrel in July after BP Plc said it was cutting output from its 400,000 bpd Prudhoe Bay oilfield due to pipeline corrosion. Non-Opec output, plus an expected increase in Opec natural gas Liquids (NGLs) and a small increase in biofuels, should still meet global demand growth forecasts of 1.24 million bpd.

COPPER

THE strike at the world’s largest copper mine Escondida in Chile continues. The strike has entered the third week, with the union rejecting a new wage offer and the mine owner BHP Billiton inviting workers to negotiate individual contracts.

Three month London Metal Exchange (LME) copper futures were quoted $7,550/$7,560 per ton on August 22, down $100 from a day earlier.

Mining stocks on London’s leading share index were little changed with BHP Billiton up 4 pence at 1054, Kazakhmys down 8 pence at 1224 and Rio Tinto down 15 pence at 2741 pence.

Fledgling copper miner Nikanor, which floated on London’s junior AIM market in July and plans to reopen one of the largest copper mines in the Democratic Republic of Congo, was down 2.5 per cent.

Analysts said the turbulent political situation in Congo, where gun battles have raged in the capital Kinshasa for a third day after recent elections, might cut the former Belgian colony’s chances to revive its battered copper industry.

Nickel

ON August 23, three month nickel fell four per cent to $28,750 a ton after it hit a record $29,950 in the previous session.

London Metal Exchange stocks available for delivery rose 174 tons to 1,956 tons. However, this modest increase in stocks had little impact on market tightness and cash nickel traded at $33,325 a ton on August 23.

James Gutman, senior commodity economist at Goldman Sachs, said nickel prices could be expected to fall, perhaps abruptly, in coming months but a move below $15,000 a ton was unlikely due to strong structural support for high prices.

Metal stocks usually rise over the summer months when plants are shut down but both copper and nickel stocks have remained at extremely low levels.

Robin Bahr of UBS said he expected the downtrend in metal stocks to be sustained to the end of the year at industrial activity picked up in the fourth quarter, providing support for prices.

London Metal Exchange (LME) monitored nickel stocks rose 414 tons to 6240 overnight, of which 1782 were available to the market supporting global consumption of 3600 tons a day.

COCOA/COFFEE

COCOA prices declined amid encouraging signs of a bumper harvest in leading producer Ivory Coast. On the LIFFE, London’s futures exchange, the prices of cocoa for December delivery decreased to £869 per ton on August 18, from £894 a week earlier.

On the New York Board of Trade (NYBoT), the December contract slid to $1,543 per ton on August 18, from $1,602 a week earlier.

Coffee prices hit the best level for six and a half years in London on concerns over tight supplies in Vietnam. However, Arabica prices fell on forecasts of an abundant harvest in Brazil.

On LIFFE, Robusta quality for November delivery gained to $1,460 per tonne on August 18, from $1,408 a week earlier.

On NYBoT, Arabica for December delivery slid to 106.90 US cents per pound on August 18, from 108.80 cents.