LONDON, May 31: Oil prices this week sank further from record heights above $135 a barrel as concerns eased over tight supplies, high demand and as the dollar recovered. Metals slumped in oil’s wake, traders said.

OIL: The price of crude slid on profit-taking as traders reacted to the strong dollar, which discourages demand for goods priced in the US unit because they became more expensive for foreign buyers.

The market staged a modest rally late on Friday as bargain hunters snapped up oil ahead of the weekend.

However, prices have fallen heavily over the past five days after a record-breaking run that saw crude surge beyond $135 last week on concerns about stretched energy supplies.

At $135 a barrel, oil was up more than a third since the start of 2008.

Overall, it seems clear that recent supply concerns were outweighed by the broad sell-off in commodities due to the recovering dollar, said Sucden analyst Andrey Kryuchenkov in reference to recent price losses.

In foreign exchange markets on Friday, the dollar resumed its climb against the euro and yen, after a rally overnight sparked by an upgrade to US economic growth, traders said.

Oil was long due for a downward correction after such a strong run higher, said Kryuchenkov. In the long run, the market still remains well supported by limited supplies, he added.

Prices slumped by more than four dollars on Thursday as traders set aside news of falling energy reserves in key consumer the United States.

The US government’s Energy Information Administration (EIA) said American crude reserves sank 8.8 million barrels in the week ending May 23 while gasoline reserves dived by 3.2 million barrels.

Prices had initially jumped higher in the wake of the news but then tumbled as some analysts questioned if energy demand was dropping amid sky-high prices.

While prices have eased, the still very high cost of crude has continued to spark international concern this week.

British Prime Minister Gordon Brown warned Wednesday the world was facing a “great oil shock” that needed a comprehensive international strategy to address.

Analysts said recent speculative oil trading had been driven by tight global supplies, the weak dollar, unrest in key crude producers like Nigeria, and OPEC’s unwillingness to boost output.

By Friday, Brent North Sea crude for delivery in July dived to 127.75 dollars from 133.44 dollars the previous week.

New York’s main oil futures contract, light sweet crude for July slumped to 127.32 dollars from 133.17 dollars.

PRECIOUS METALS: Gold, silver, platinum and palladium all fell as the dollar rallied.

Given the improved dollar sentiment and the general view that commodities are perhaps a little overbought it’s likely that short-term (price) sentiment will remain bearish (weak), said James Moore of the LondonBullionDesk.com.

Meanwhile sliding oil prices reduced concerns about inflation, discouraging investors from buying gold, which is widely regarded as a good store of value.

On the London Bullion Market, gold dropped to $885.75 per ounce at Friday’s late fixing from $927.50 a week earlier.

Silver declined to 16.85 dollars per ounce from $18.10.

On the London Platinum and Palladium Market, platinum slipped to $2,008 per ounce at the late fixing on Friday from $2,182 a week earlier.

Palladium reclined to $430 per ounce from $451.

BASE METALS: Base metals prices slumped, with nickel and zinc reaching fresh two-year lows.

“A few things have come together at the same timeto create lower prices, said BNP Paribas analyst David Thurtell.

Firstly, evidence of weak demand from consumers in base metals. Secondly, the production interruptions that have characterised the market this year have eased slightly.

Thirdly, inventories of many base metals have risen somewhat recently.

Fourthly, the dollar has firmed and the oil price has corrected somewhat from its recent all-time highs, added Thurtell.

By Friday, copper for delivery in three months fell to $7,925 per tonne on the London Metal Exchange from 8,200 dollars a week earlier.

Three-month aluminium dropped to $2,923 per ton from$ 2,988.

Three-month nickel slid to $22,187 per ton from $23,510.

Three-month lead decreased to $1,950 per tonne from $2,020.

Three-month zinc declined to $1,991 per tonne from $2,143.

Three-month tin slumped to $22,187 per ton from $23,510.

COCOA: Cocoa prices rebounded after striking five-week lows the previous week in London.

Ivory Coast in west Africa is the world’s biggest cocoa-producing country.

By Friday on LIFFE, London’s futures exchange, the price of cocoa for July delivery rallied to 1,459 pounds per tonne from 1,377 pounds a week earlier.

On the New York Board of Trade (NYBOT), the July cocoa contract jumped to $2,721 per ton from $2,573.

COFFEE: Coffee prices showed mixed fortunes.

By Friday on LIFFE, Robusta for July delivery edged up to $2,269 per ton from $2,248 a week earlier.

On the NYBOT, Arabica for July delivery slipped to 133.65 US cents per pound from 134.60 cents.

SUGAR: Sugar prices fell further owing to robust supplies.

By Friday on LIFFE, the price per tonne of white sugar for August delivery dropped to 320 pounds from 326 pounds the previous week.

On NYBOT, the price of unrefined sugar for July delivery reversed to 9.82 US cents per pound from 10.24 cents.

GRAINS AND SOYA: Maize and soya prices fell as oil futures slumped.

There has been a very tight correlation between crude oil futures and soybean oil futures. The crude weakness also spills into the corn (maize) contract, said Allendale analyst Joe Victor.

Maize and soya are used to produce ethanol, which is a cheaper alternative to gasoline (petrol). Brazil is a major producer and consumer of ethanol used to power vehicles.

By Friday on the Chicago Board of Trade, maize for July delivery dropped to $5.90 per bushel from $5.99 the previous week.

July-dated soyabean meal -- used in animal feed -- slid to $13.36 from $13.68.

Wheat for July delivery rose to $7.54 per bushel from $7.52 .

RUBBER: Rubber prices continued to rise on concerns over a supply shortage.

We have a raw material shortage due to wet weather in Asian-producing countries, said an official at a rubber production firm who requested anonymity.

On Friday, the Malaysian Rubber Board’s benchmark SMR20 increased to 311.50 US cents per kilo from 302.70 a week earlier.—AFP