April 09, 2007	Monday	Rabi-ul-Awwal 20, 1428

Oil

IN the London market, oil prices which had climbed to $63 a barrel on March 26, setting a 2007 record, on growing tension between Iran and the West over Tehran’s nuclear work and its capture of British servicemen declined by near $2 on April 3. After news that Iran agreed to release the British sailors world oil prices showed a mix picture.

In London trading, the price of Brent North Sea crude for May delivery had fallen to $66.93 on news of the sailors’ release. New York’s main oil futures contract, light sweet crude for delivery in May, dropped 34 cents to $64.30 per barrel.

Iran is the world’s fourth largest oil exporter. Countries in the Middle East pump more than a fifth of the world’s daily oil production of some 85 million barrel per day. Earlier, on March 30, in the London market, the price of Brent North Sea crude for May delivery reached $69.14 a barrel — the highest level since September 4, 2006.

Prices began surging after Britain froze ties with Iran after it refused to release 15 British sailors and marines it had captured on March 23. Iran insists that the personnel were detained for being in Iranian waters but Britain maintains they were inside Iraqi waters. Oil prices are being supported also by Iran’s refusal to bow to international pressure stemming from its disputed nuclear programme.

Despite the week’s spike to crude — prices have shot up more than nine percent since March 23 — they remain a long way off record highs of above $78 dollars a barrel struck last year.

Tin/Copper

ON March 26, tin set a fresh high on the London Metal Exchange. Tin set a new record high of $14,450, supported by supply concerns at the second largest tin supplier Indonesia. Where a government crackdown on illegal mining has slashed production levels, and because of low inventories of the base metal.

Tin was at $14,400 against its last quote on March 23 at $14,325/14,350. “Tin we expect to continue steady,” another LME trader said. The early part of the week could see some consolidation as it was only four days until the end of the quarter and, for some participants, the end of the financial year.

Meanwhile, copper prices came close to touching the $7000 a tonne level on April 2, for the first time since December, as the metal rose $100 to $6980 a tonne. Copper prices have been driven by prediction of demand exceeding supply this quarter.

Falling inventories, down over 15 per cent from mid-February to 181,550 tonnes, were an important sign of strong demand, in particular from China, and this suppo9rted prices, Michael Widmer at Calyon said.

Deutsche Bank upgraded its average cash copper price forecast for 2007 and 2008 and the bank’s report said the first quarter’s macro-economic data from China was supportive. Chinese industrial production growth of 18.5 per cent for the first two months of the year had a stimulatory effect on import demand for refined and raw materials in China, the report said.

“We have raised our copper price forecast by six per cent to 2.86 cents per pound ($6,290/t) for 2007 as increased Chinese consumption and continuing supply constraints are expected to help neutralize the impact of weak U.S. consumption,” it said.

The bank raised its 2008 forecast by 7 per cent to $5,523. Numis Securities upgraded its commodity price forecasts for 2007 and 2008 on strong metal imports from China and continuing firm global GDP growth.

Gold

GOLD prices have risen in recent days, as geopolitical concerns in the Middle East boosted safe-haven buying, while strong oil prices lent support. Spot gold rose to $669.50, the highest since March 1.

“We believe gold is likely to continue taking direction from the dollar and oil prices in the forthcoming sessions and further upward momentum should continue to be supported by geopolitical tensions,” said Costanza Jacazio, metals analyst at Barclays Capital.

Iran, the world’s fourth-largest crude exporter, has been under mounting pressure to abandon its nuclear programme, and tensions ratcheted up on March 23 when Iranian forces captured 15 British sailors and marines.

Higher oil prices, reviving inflationary worries, prompt risk-averse investors to turn to safe-haven assets, boosting the appeal of gold. “The fundamental drivers and the status as a safe haven should be supportive for gold and might lead to a test of resistance at $667 to $670,” Dresdner Kleinwort said in a note.

In Asia, in the Singapore market, spot gold hit a high of $674.70 an ounce, before easing to $672.40/672.90 versus $673.80/$674.30 late in New York on April 4, when it jumped to its highest since March 1 at $675.80 on a weak US dollar.

Dealers said sentiments turned bullish after gold breached a key resistance of $670, and a weaker dollar may encourage more investors to rebuild their positions after the recent sell-off.

Gold has rebounded as much as 6.8 per cent since hitting a six-week low of $632.30 on March, when tumbling global stocks and a rising yen forced risk-averse investors to sell gold to cover losses.

Meanwhile, silver prices dipped, failing to gain from gold’s rise. On the London Bullion market, silver prices stood at $13.35 an ounce at the close of the day ie March 30, from $13.37 the previous week.

Cocoa/Coffee:

COCOA prices have risen to their highest levels since 2003 on drought fears in main producer Ivory Coast. New York futures hit $1,966 a tonne, last reached in May 2003. In London, prices rose to £1,056 pounds a tonne, not seen since September 2003. “The market has been driven by the fears of the drough from the Ivory Coast,” Standard Chartered analyst Abah Ofon said.

The market has really concentrated on demand and supply. There is a little bit of worry that supply is going to decrease,” he added. By March 30, on the LIFFE, the price of cocoa for May delivery jumped to £1,056 a tonne, from £1,039 a week earlier. On the New York Board of Trade (NYBOT), the May contract advanced to $1,951 a tone, from $1,907 the previous week.

Coffee prices fell, hit by rising European stockpiles of the commodity amid expectations of robust production. By March 30, on the LIFFE, robusta quality for May delivery slid to $1,513 a tonne, from $1,567 a week earlier. On the NYBOT, Arabica for May delivery dropped to 109.15 US cents per pound on March 30, from 113.45 cents the previous week.