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Oil prices have held firm in recent days as dealers fretted over a gasoline supply crunch in the US. Ethnic violence in the key oil producing area of Nigeria and further set backs to Iraq’s attempts to export oil after saboteurs attacked the main northern oil pipeline pushed oil prices higher.
Brent crude oil in London was $29.61 a barrel on August 22, after rocketing 87 cents on August 21. New York crude futures were 12 cents down at $31.76 a barrel in electronic trade. Prices are within $1 of five-month highs hit earlier this month after gasoline supplies in the giant US market dropped ahead of the Labour Day holiday weekend, when a record number of drivers are expected to hit the roads for vacation.
Signs of economic recovery in the United States and Japan, both voracious oil importers, fuelled the gains by brightening the outlook for global fuel demand. Prices began their rally on August 20 after US government data showed a fall in gasoline supplies to their lowest levels in nine months.
A record 28.2 million US travellers are expected to motor more than 50 miles by car on the coming Labour Day weekend, up 2.2 per cent from last year, according to a survey by the American Automobile Association. Refinery problems in the United States and Europe stoked concerns about low inventory levels. Last week’s massive power outage in North America led production to be halted at seven refineries.
The overall US crude stocks have remained below year-ago levels for months following supply disruptions from producer nations Iraq, Venezuela and Nigeria. Many in the market are resigned to Iraqi oil exports probably not returning to prewar levels in the near future as attacks on oil pipelines and power lines have hampered efforts to restore supplies.
Iraq’s oil export pipeline to Turkey is set to reopen in one week or two weeks after damage from a sabotage attack has been repaired. Fires closed the pipeline — which carries crude from Iraq’s northern Kirkuk fields to Turkey’s Mediterranean coast — just as the link was set to ship large volumes to world markets after a five-month closure. Traders are also nervous about political tensions in Venezuela, another vital supplier of crude to the United States.
In the week ended August 23-24, nickel prices reached three year highs, as global stockpiles of the metal reached record lows and the market felt the effect of an 11 week strike at the Sudbury mine in Ontario, owned by Inco, the world’s second largest nickel miner.
The benchmark three-month nickel price on the London Metal Exchange peaked at $9,800 a tonne on August 20. Some analysts say it will not be long before the metal, of which about two-thirds is used in stainless steel production, breaks through the $10,000 a tonne level.
The LME nickel three-month price closed at $9,540, up more than 3 per cent on the week. This caps a rise of more than 70 per cent since the start of last year, making nickel the best performing metal over that period. The only thing that can stop nickel going through $10,000 in the short-term is if the Inco strike is called off, said Jim Lennon, base metals analyst at Macquarie Bank. Lennon said global nickel stocks equated to 8.5 weeks of western world demand at the end of July, the lowest in recent memory. This does not include China, which consumes about 10 per cent of annual primary nickel output, and accounts for another 10 per cent of nickel use through stainless steel imports. The low stockpiles and the Inco strike prompted Macquarie to raise its nickel price estimates last week.
