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LONDON, Aug 17: Oil prices stormed to their highest level in three months this week, buoyed by a spectacular drop in US oil inventories, renewed optimism on Wall Street and ongoing speculation of a US-led attack on Iraq.
The US energy department said Wednesday stocks of crude oil fell 7.2 million barrels, or 2.3 per cent, to 300 million in the week ended August 9, while gasoline stocks fell 4.5 million barrels.
Analysts said the market also drew strength from persistent speculation about a US-led attack on Iraq, which dealers worry would destabilise the Middle East oil producing region.
US President George Bush’s national security adviser, Condoleezza Rice, said Thursday the West did not have “the luxury of doing nothing” to remove Iraqi leader Saddam Hussein.
And the recovery in US stock prices, which boosted hopes the US economy may avoid a “double-dip” recession, provided the market with an additional pillar of strength.
Wall Street’s return to form, coupled with some better-than-expected figures on US industrial output, helped propel base metal prices higher as the market recovered from recent low points.
And the rally in US stock prices failed to damage sentiment in precious metals markets, with gold ending the week slightly higher.
GOLD: Gold prices see-sawed in quiet trading, ending the week on a firmer footing despite gains on US stock markets.
Friday afternoon, gold was fixed at $314.20 an ounce on the London Bullion Market against $312.95 the previous week.
It’s been able to find support at around the $312 an ounce level, said Barclays Capital analyst Howard Patten.
Prices have stabilised by virtue of the low levels of activity rather than any fundamental strength at these sorts of support levels, he told AFP.
SILVER: Silver prices fell as speculative funds that had bought large holdings of the precious metal unwound their positions, traders said.
Silver was fixed on the London Bullion Market at $4.5050 an ounce on Friday afternoon, against 4.63 the previous week.
PALLADIUM and PLATINIUM: Platinum garnered some support from Japanese buying while palladium had another uneventful week.
On the London Platinum and Palladium Market (LPPM), an ounce of platinum rose to 553 dollars an ounce on Friday from $543 a week earlier.
Platinum has seen some fairly good levels of Japanese buying activity for quite a few days now, said Patten.
BASE METALS: Base metal prices rallied as a firmer tone on US stock markets and expectation-busting US industrial production data offered some rays of optimism for demand for the complex.
Macquarie Bank analyst Adam Rowley said there were two drivers behind the rally.
Firstly, the firmer tone on the US equity market ... and also the stronger-than-expected US industrial production figures, which he said were much better than expected.
Industrial output rose by 0.2 per cent in July, the US Federal Reserve reported, confounding predictions of a fall.
Among other base metals, three-month nickel prices rose $10 to $6,680 per ton, zinc rose five dollars to $763 per ton, tin rose $30 to $3,880 while lead slipped one dollar to $428.
OIL: Oil prices stormed to their highest level in three months this week, buoyed by a spectacular drop in US oil inventories, renewed optimism on Wall Street and ongoing speculation of a US-led attack on Iraq.
Brent crude for October delivery had risen to $26.81 from $25.18 a week earlier.
In New York, September-dated light sweet crude futures rose to $29.06 from 26.66 a week earlier.
The rally was sparked initially by news of a steep decline in US inventories.
The US energy department said Wednesday stocks of crude oil fell 7.2 million barrels, or 2.3 per cent, to 300 million in the week ended August 9, while gasoline stocks fell 4.5 million barrels.
The DoE data compared with figures released late Tuesday by the American Petroleum Institute, a private trade association, which estimated that crude stocks fell 9.5 million barrels.
RUBBER: Rubber prices rose sharply this week on news of a disruption to production in Thailand and as the market belatedly welcomed the signing of an accord, the previous week, by the world’s top three rubber producers.
In Kuala Lumpur, the RSS index rose to 3.260 ringgit per kilo from 3.105 ringgit the previous week.
Symington analyst Martin Hampson attributed the majority of the rally to a more positive assessment of the implications of the agreement between leading producers Indonesia, Thailand and Malaysia.
COCOA: Cocoa prices soared back up to recent 15-year highs this week, propelled by speculative buying in the absence of any notable selling.
On LIFFE, London’s financial futures exchange, the price of cocoa for December delivery rose to 1,348 pounds a tonne on Thursday from 1,299 pounds the previous week.
COFFEE: Coffee prices resumed their downward trend this week, with a two-week winning streak grinding to a halt as producers decided to profit from the recent rise in prices.
SUGAR: Sugar prices crept higher this week as an official estimate that US output could be smaller than previously envisaged was only partially offset by talk of higher Chinese output.
Analysts said the market was lifted by news that the US agriculture department (USDA) had revised down its estimate of US production.
The USDA cut its forecast for US production in fiscal 2002/03 by 275,000 tons, with sugar beet output seen 175,000 tons lower than previously, and sugar cane output 100,000 tons less.
The USDA explained that the downward revisions were due to a reduction in the area of land used for the cultivation of sugar beet, forecasts of a drop in yield, and predictions of reduced plantations of sugar cane in Louisiana.
SOYA: US soya prices jumped to their highest level in more than three years this week as concerns mounted that this year’s US crop would be badly affected by the drought plaguing major US growing regions.
GRAINS: Grain prices rose after torrential rain hit many parts of Europe and parched conditions affected producing regions in North America and Australia.
After a three-month period of dry weather, the US agriculture department (USDA) rated 31 per cent of US maize crops as being in a poor or very poor condition, against 29 per cent the previous week.
It also cut its monthly forecast of the 2002 maize harvest to 225.7 million tons, 9.2 per cent lower than its July forecast. That would be the worst harvest since 1995.
The USDA cut its prediction for the wheat harvest to 45.89 million tons from 47.59 million.
COTTON: Cotton prices fell back in New York in response to bigger-than-expected forecasts of the size of the 2002/03 US crop, which the US agriculture department estimated at 18.4 million bales against 17.5 million previously.
But the extra supplies should be offset somewhat by a smaller-than-expected crop in the rest of the world which is seen at 71 million bales, the lowest for three years.
In total, the global harvest should reach 89.4 million bales in 2002/03, down nine per cent from 2001/02.
In New York, the December contract fell to 45.78 cents a pound on Thursday from 46.32 the previous week.
But the Cotton Outlook Index of physical cotton, the average of the world’s lowest prices, rose to 49.65 cents a pound from 49.05 the week before.
WOOL: Wool prices stuck close to recent two-month highs thanks to strong demand notably from China and Europe, according to the Australian Wool Industries Secretariat.
The Australian Eastern index was unchanged at 926 cents.
The British Wooltops index dipped to 465 pence from 465.50 a week earlier. —AFP
