June 23, 2008	Monday	Jamadi-us-Sani 18, 1429

Oil:

Crude oil rose to a record high of almost $140 a barrel on June 16 in the London market, despite news that Saudi Arabia was ready to raise output to help cool soaring energy costs threatening economic growth.

New York main oil futures contract, light sweet crude for July delivery reached $139.89, beating its all-time high of $139.12 recorded on June 6. Oil prices were winning support from a weaker dollar, which helps lift demand for commodities priced in the US unit as they become cheaper for foreign buyers.

The market was also digesting news of a partial halt to oil production in Norway – the world’s fifth biggest exporter of crude – after a fire had struck a North Sea platform on June 15. Brent North Sea crude for August delivery struck a lifetime high of $139.32 on June 16.

There were recent reports that Saudi Arabia could decide to raise its crude output to 10 million barrels per day (bpd) when it hosts the Jeddah Summit on June 22. The Opec kingpin is currently producing 9.45 million bpd after announcing an increase of 300,000 bpd last month following a visit by US President George W. Bush.

There were reports in the press that Saudi Arabia had announced plans to increase daily oil output by 200,000 barrels per day. Earlier, Saudi Arabia, the world’s top oil exporter, had said that it would boost output next month to help tame what it sees as unacceptably high prices.

The Saudi plan comes ahead of a meeting of producers and consumers it is hosting on June 22 to discuss the reasons for high prices and amid calls from consumers, such as Britain, for more oil.

But Iran, Opec’s second largest producer, and other members have repeatedly said the market is well supplied and blamed high prices on speculation, a weak US dollar and political tension.

Dealers said Saudi Arabia’s spare capacity buffer that responds to supply disruptions – from Nigeria, Venezuela, Iraq or Iran – would also be diminished by a production increase, potentially increasing the risk of a future price spike. Opec has repeatedly blamed speculators and weakness in the US dollar for driving oil prices higher.

Data on speculative positioning from the Commodity Futures Trading Commission shows speculators reduced their bets on oil prices rising with the net long position down 10.8 per cent to 25,246 lots in the week ending June 10 when WTI reached $131.31.

The Organisation of the Petroleum Exporting Countries (Opec) cartel has cut its 2008 estimate of growth in world oil demand, as high prices and slower economic growth brake demand in major industrialised countries.

Global oil demand was now projected to grow by 1.28 percent in 2008, compared with the previous estimate of 1.35 per cent, Opec said in its June monthly report. Meanwhile, high global oil prices and cuts in fuel subsidies will slow growth of oil demand this year, the IEA forecast recently, reporting also a supply surge of half a million barrels per day in May.

The IEA, the oil market watchdog for industrialised countries, also sent a strong message to reassure markets that it would release strategic oil stocks if supplies were disrupted by tension, or an eventual attack, over Iran’s nuclear programme.

Opec members say the market does not need more crude and questioned whether higher supply would lower prices. Opec is of the opinion that an increase is not needed as the current supply level exceeds demand and spiralling prices are mainly caused by speculators.

In the London market, world oil prices stood at $137 a barrel on June 19, after a militant attack slashed output in Nigeria, Africa’s biggest crude producer.

Prices had leapt higher on June 19 after Anglo-Dutch oil giant Shell said it had shut down production at a major offshore oil facility in Nigeria because of a militant attack. Violence in the southern Delta region has reduced Nigeria’s total oil production by a quarter since January 2006.

Crude futures had reached historic high points earlier last week as traders were gripped by supply jitters, despite news that Saudi Arabia could lift production to help dampen the market.

Goldman Sachs Group Inc’s global investment research team said it has increased its oil price estimates from 2008 to 2012 in anticipation of continued tightening of global crude supply and demand fundamentals.

The bank expects a tight supply of oil to push Brent crude prices to an average of $117 for 2008 from the previous $108 a barrel and to $140 next year from $110 a barrel.

Cocoa/Coffee:

Cocoa prices rose to a 28-year high in New York on June 14, lifted by fears about weak harvests in leading global producer, Ivory Coast. New York cocoa soared as high as $3,007 per tonne, which was last seen in March 1980.

By June 13 on LIFFE, London’s futures exchange, the price of cocoa for September delivery rallied to £1,615 per tonne from £1,539 a week earlier. On the New York Board of Trade (NYBOT), the July cocoa contract jumped to $3,003 per tonne from $2,882.

Meanwhile, coffee prices have drifted lower in subdued trade. By June 13, on LIFFE, Robusta for September delivery eased to $2200 per tonne from $2244 a week earlier. On the NYBOT, Arabica for July delivery dipped to 134.30 US cents per pound from 137 cents.