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At a recent meeting of the Organization of Petroleum Exporting Countries (Opec), the 11-member cartel decided to keep their output quota unchanged at current levels. It agreed to keep oil output at 25.4 million barrels a day and called another meeting in end July, in case the resumption of Iraqi oil exports reduces prices. Oil prices are at the upper end of Opec’s preferred range of $22-$28, giving it time to wait to make any cutbacks.
The British Petroleum annual statistical review released recently shows that oil output in countries of the former Soviet Union increased 9.4 per cent from 2001 to 2002, while Opec’s production fell 6.4 per cent in large part because of voluntary restraints. Opec is hoping that in a few years increased oil demand from the US and China will no longer be met by growth in oil production outside the group.
The International Energy Agency (IEA), energy adviser to 26 industrialized nations, said recently that oil prices fell more than 5 per cent as major consumers were more comfortably supplied than it previously thought. US crude fell $1.66 to $29.85 a barrel, pulling prices away from recent 12-week highs of $32.
The agency’s revised estimate put oil stocks in the industrialised world for the end of April at 2.439 billion barrels. The IEA said the revision did not change its view that global markets were tight. Stocks are still 157 million barrels, or 6.5 per cent, below 2002.
Oil stocks have been drawn down this year by a harsh northern winter and supply disruptions from a strike in Venezuela, ethnic strife in Nigeria and the war in Iraq. Iraq on June 12 sold its first oil since the US-led invasion nearly three months ago, but looting and sabotage at oil facilities are expected to keep Iraq’s exports well below prewar levels for several months. The delays in Iraq’s post-war export resumption enabled the Opec producer group to postpone fresh supply cuts at recent meeting in Qatar.
The agency said industry stocks in the industrialized world at the end of April at 2.439 billion barrels were still 157 million barrels below the previous year. Opec crude output in May rose by 220,000 barrel per day in May to 26.4 million bpd, the IEA said, due to a recovery in Venezuela and Nigeria where production was crippled earlier this year by strikes and ethnic clashes.
Recently nickel prices dropped more than 2 per cent after Norilsk confirmed it had sold 24000 tonnes of nickel held in storage as collateral to a three year $200 million loan. Three months nickel ended at $8,830 a tonne.
The metal was the remaining part of a 60,000 stockpile the Russian miner had held off-market. When it sold 36,000 tonnes in late march, it pulled nickel prices down from the high $8,000. But strong demands from China and supply problems have pushed nickel prices back above $9,000. This rise has helped nickel outperform other base metals over the past 18 months. The sale by Norilsk is seen as another attempt to lower prices.
Ingrid Sternby, base metals analyst at Barclays Capital, said the release of the Norilsk stockpile should help ease near-term market tightness despite the ongoing Inco strike.
Given heavy fund exposure on the long side, it expects the LME three-month price to trade below $9,000 a tonne for the rest of this year and rules out another sharp price spike in the near term unless the strike at Inco continues for an extended period of time.
Base metal analysts forecast nickel prices to remain at or below the $9,000 level with the market expected to be in surplus as opposed to initial expectations of a deficit, following the release of the Norilsk stockpile.
However, prices next year are estimated to rise above $9,000 on the back of a global economic pick-up and falling production due to the lack of new mines and dwindling supply from existing ones. In the 1990s miners bet on technology lowering the cost of extracting nickel from laterite deposits, brick-coloured ore found in warn climates.
Gold prices have moved up in recent weeks. On June 9, it rose to a high of $370 a troy ounce as the dollar weakened against the euro. Gold analyst at the HSBC, said gold speculators were near their record long position — an indication that they expect gold prices to rise — and may have exceeded the previous record of 12.7 million ounces in February.
Gold Fields, South Africa’s second largest gold miner has reached an agreement in principle to sell 15 per cent of its shares to an investment consortium. Mvelaphanda Resources will pay R4.1 billion ($514.5 million) for the stake, which will cover Gold Fields’ current South African gold-mining assets. Gold Fields, which produces 4.1 million ounces of gold each year and has platinum interest and operations in Australia and Ghana, said it would offer Mvela vendor financing capped at R300 million.
