December 04, 2006	Monday	Ziqa'ad 12, 1427

Oil

Following a week of fluctuations, prices finished higher because of export problems in Alaska and Nigeria. Movements tended to be exacerbated with slower trading because of the Thanksgiving holiday in the United States. Prices began the week lower before rebounding by more than $1.30 on November 21, as bad weather interrupted exports from Alaska.

Loading of crude at the Valdez export terminal were suspended on November 20, reducing by up to 75 per cent deliveries through the Trans Alaska Pipeline. Loading resumed gradually on November 23.

Concern about supplies eased on November 22 when the US government announced an increase of 5.1 million barrels in crude stockpiles last week in the United States, or seven times more than expected by analysts. However, the suspension of some exports from the Italian group ENI in Nigeria following a new separatist attack sent prices back upward. The increases in prices is curbed however by lingering skepticism over the intentions of the Organisation of Petroleum Exporting Countries

Opec was a pains to convince the market that it will follow through on a pledge to reduce output by 1.2 million barrels per day in November, and reduce it again in December.

Metals

THE price of nickel and platinum hit historic highs last week, while gold, silver and copper also posted strong gains. The weakness in the dollar provided a boost across the metals market.

Base metals rose, with nickel hitting a new peak since its first quotation in 1979, supported by low global supplies and the weak dollar. The price of nickel climbed on November 24 to $33,500 per tonne on the electronic platform of the London Metal Exchange (LME), the world’s premier non-ferrous metals markets. It has now surged by 150 per cent since the start of the year. “In thinner than usual trading conditions because of the US Thanksgiving holiday, base metals extended their recovery from the recent lows, with zinc and nickel leading the charge higher helped by a weaker dollar,” UBS bank analyst Robin Bhar said. Since base metals are traded in dollars, a weaker greenback boosts demand, and prices especially if supplies are limited.

Zinc continued its strong run, gaining 12.2 per cent to $4515 a tonne. Zinc prices have risen by more than 130 per cent this year as stocks have shrunk to their lowest levels since 1991 at just 87,925.

Dealers described the European market as “almost starved” of zinc, which is being reflected in the rising premiums consumers are prepared to pay over cash prices in order to ensure delivery. The premium is up from $120 per ton at the start of the year to $320 to $360 a ton currently.

Sentiment towards copper was boosted by news of the Freeport-McMoRan bid to acquire Phelps Dodge in a deal that would create the world’s largest listed copper company. “It is clear that Freeport is banking on the fact that it is not doing this deal just as the copper price is about to burst,” said Robin Bahr of UBS.

Copper hit $7,240 a ton after a fall of 3,850 tonnes in LME stocks, with sentiment supported by news on November 24 that Hindalco, of India, had suspended operations at one of its smelters due to a shortage of copper concentrate feed.

Gold

IN the wake of a weaker dollar, gold traded at $640.40 on November 24, its highest level since September 6. “In the absence of strong fundamentals support at current price levels the future path of the euro and US dollar is likely to remain a key theme in the gold market over the next few months,” said Costanza Jacazio, an analyst at Barclays.

The dollar rebounded after briefly hitting a 20 month low against the euro. If the dollar continues to weaken then gold will go higher. Gold prices have eased in the last few days as the dollar strengthened after upward revisions to third quarter US gross domestic product data. Barclays said investor interest was recovering with more than 40 tonnes of bullion flowing into gold ETF’s in November, the strongest month since January.

According to figures compiled by Golf Fields Mineral Services (GFMS) in London for the WGC, there was a decrease in demand in the Middle East and Gulf region for gold jewellery by eight per cent in tonnage terms compared to a year earlier. “This decrease in demand is justified normally as a predictable reaction to a volatile gold price especially in Asia and in the Middle East along with other local and regional factors, such as the war in Lebanon, it explained. In the UAE, the second in demand among the GCC countries, the demand was stable due to high tourist numbers in the third quarter (as compared to the same quarter last year) and in spite of the increase in living costs, especially in Dubai, Gold jewellery demand was down by less than one per cent (especially 22K gold jewellery preferred by Indians) while net retail investment (gold coins and bars) was up by five per cent. Total demand reached 22.9 tons, which is equivalent to the demand in the same quarter of 2005. As for other Gulf States) Kuwait, Oman, Bahrain and Qatar) total gold demand declined by nine per cent reaching 12 tons.