April 23, 2007	Monday	Rabi-us-Sani 05, 1428

Oil

In the week ended April 15, the price of crude oil reached the highest level since September in London trading, as the market worried about tight US stockpiles of motor fuel heading into the peak demand season.

The price of Brent North Sea crude struck almost $70 on supply concerns. Brent hit a seven month high of $69.59 a barrel on April 13, on concerns that crude oil supplies might be insufficient to meet demand.

New York’s main oil futures contract, light sweet crude for delivery in May, breached $64 but ended the week lower. All eyes are on the health of US gasoline stockpiles, which are a crucial focus for the market ahead of the US driving season.

The peak-demand season for motor fuel starts next month and sees many Americans hit the roads for their summer vacations. Inventories of US gasoline, or petrol, plunged by 5.5 million barrels to 199.7 million in the week to April 6, the US Department of Energy reported. Analysts had forecast a lighter drop of 1.4 million barrels.

Meanwhile, the International Energy Agency warned that the Opec oil producers’ group might have cut its production too much, with insufficient current output eroding world stock levels.

The 12-member Organisation of Petroleum Exporting Countries decided to cut its production twice at the end of last year to support prices that were falling at the time.

According to recent estimates, world oil requirement would rise by another 23 million barrel per day or 28 per cent to around 106 million bpd by 2020 from the average demand level of 2005, estimated at around 83 million bpd.

Steve Peacock, President, Exploration & Production, BP Middle East &South Asia, said the application of innovative technologies and cooperation between governments, national oil companies and international oil companies would be crucial if GCC oil and gas producers are to succeed with ambitious plans to expand capacity over the next 10-15 years.

Major Gulf producers have announced plans to increase capacity by more than 50 per cent by 2020, equivalent to an unprecedented average of one million barrels/day of net productive capacity per year. These plans take on new significance in light of increasing global energy demand and domestic and international economic growth.

According to the latest BP Statistical Review of World Energy, some 60 per cent of global oil reserves and 40 per cent of global gas reserves are located in the Middle East. With global energy demand rising fast, and domestic demand spurred by economic growth and large scale commercial and industrial projects, the world, as well as this region, is relying on the Middle East’s ability to expand production.

Gold

Gold prices have risen in recent weeks. In the London market, gold rose to a fresh six week high, boosted by a drop in the dollar and firm oil prices, analysts said. Spot gold traded upto $691.50 per ounce, before slipping as low as $678.70.

Gold had risen, supported by the softening dollar and strengthening oil prices, Barclays Capital said. A weaker dollar gives buyers more purchasing power in dollar-denominated gold, which is also often seen as a hedge against oil-led inflation.

Oil topped $64 a barrel, extending a three per cent gain a day earlier, as traders pondered a series of refinery outages in United States that drained gasoline stocks as the typically heavy summer driving period approached.

Despite gold’s range-bound trading pattern, analysts said the metal would set new highs further forward. Deutsche Bank saw gold prices rising to $740 in the long run.

On April 19, gold was quoted at $678.70 in the London Market. Meanwhile, palladium prices reached $374 an ounce — the highest level since mid May 2006.

“Palladium is rising on technical factors more than anything else,” UBS analyst John Reade said. “It’s not driven by underlying fundamentals because it’s in oversupply,” Standard Chartered analyst Helen Henton said.

Platinum, meanwhile, rose to $1,273.50 an ounce, the highest point since November. On the London Platinum and Palladium Market, platinum increased to $1,269 an ounce at the late fixing on April 13, from $1,251 the previous week. Palladium climbed to $371.50 an ounce, from $350.50.

Copper

In the London market, copper prices rebounded on April 13, after losing ground in the previous session, underpinned by a fall in stocks of metal and a strong demand outlook. Copper for delivery in three months on the London Metal Exchange rose by $65 to $7,755 a tonne after slipping almost 2 per cent a day earlier.

Stocks of copper in LME-registered warehouses, which have fallen by almost 20 per cent since early February, currently stand at 174,300 tonnes — less than four days of global consumption. Copper prices have climbed around 25 per cent in 2007, gaining $1,000 in April alone, driven by a strong growth outlook for China, the biggest consumer of the metal.

Copper for three-month delivery on the London Metal Exchange (LME) rose to $7,970 per tonne — the highest reading since September last year. “Copper inventories generally stand below the long-term trend in the second quarter. This is one reason for the current price support,” Calyon analyst Michael Widmer said.

“In addition, Chinese imports will continue to grow strongly.” Copper is used primarily in plumbing and the manufacture of electrical cables. On April 13, three-month copper prices surged to $7,800.50 a tonne on the LME, from $7,411 the previous week.

Coffee

Coffee prices rose on buoyant investor sentiment. “London is currently being supported by New York Arabica coffee as current US market sentiment suggests that coffee prices are bottoming out after recent weakness,” Sucden analyst Michael Davies said.

By April 13, on the LIFFE, Robusta quality for May delivery rose to $1,579 a tonne, from $1,542 on April 5. On the Nybot,Arabica for May delivery increased to 112.95 US cents a pound, from 111.25 cents. Cocoa prices fell further as dealers cashed in their profits, but losses were capped by supply concerns. “Fundamentally the outlook for cocoa remains positive on the back of strong demand while global supplies are tight.”

“Concern remains about dry conditions in West African growing regions.” By April 13, on the LIFFE, the price of cocoa for May delivery dropped to £1,002 a tonne, from £1,038 on April 5.