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Oil prices rose on March 24, after news of some setbacks to the US and British forces fighting in Iraq. The price of benchmark Brent North Sea crude oil for May delivery rose by $1.31 to $25.66 per barrel. New York’s benchmark light sweet crude for May delivery climbed by $1.34 to $28.55.
Traders said the rise was inevitable given that prices had plummeted on assumptions that war would be over relatively quickly. Earlier oil prices had suffered their biggest fall since the Gulf War 12 years ago.
Nymex light sweet crude for May delivery fell to a three-month low of $27.10 a barrel on March 21, before recovering partially to $27.27 a barrel, a drop of 85 cents in early afternoon New York trade. Front-month Nymex oil futures plunged more than $8, or about 23 per cent, in the week ended March 20-21, the biggest weekly fall since January 1991. The only fall of this magnitude that has occurred between the two wars was the 21 per cent slide in Nymex oil futures in the week starting September 24 2001, following a sharp spike in the immediate aftermath of 9/11.
The fall was mirrored in London, with the benchmark IPE Brent crude contract for May delivery sliding more than $6, or about 21 per cent, last week. May Brent was 75 cents lower at $24.75 a barrel. The fall in oil prices reflected investors’ views that the war in Iraq would finish soon, with minimum disruption to supplies.
Reports that oil supplies from Venezuela were coming back stronger than expected following the almost crippling three-month strike that began late last year also eased supply position. World oil prices slipped on March 25, as British commanders spoke of an uprising against President Saddam Hussein’s forces in the city of Basra, which traders took as a sign that the war would end more quickly. New York’s benchmark light sweet crude contract for May delivery fell 69 cents to $27.97 a barrel, while in London, Brent North Seas crude oil for May delivery tumbled $1.14 to $24.95.
Oil prices rose the following day, recouping losses triggered the day before. Two factors are influencing the market: the potential for Iraqi oil to remain unavailable for longer than expected and the loss of Nigerian oil exports. The domestic clashes in Nigeria, kept closed about 800,000 barrels per day of the West African Opec country’s 2.2 million bpd of crude production.
Gold prices have fallen. In the week ended march 22-23, spot gold fell to $327.25 a troy ounce, its lowest level since mid December, representing a $5 drop on the week. Gold had fallen during the Gulf War by $40 to $366 an ounce when the allies began to evict Iraqi from Kuwait.
Gold is going to be determined by the war in Iraq now, just like the other commodity markets, said SG Securities analyst Stephen Briggs. If things continue not to be problematic for the American and British forces and the market continues to believe that it is going to be a short war, then it will put downward pressure on gold, he said. The war’s influence would also be felt indirectly through movements in the dollar, which climbed on news that the war had begun.
Palladium prices have been hit by oversupply and low demand from car manufactures. Prices of the precious metal, used mainly to clean car exhaust emissions but also in the dental and electronics sector, held just above 5 year lows at $195 an ounce on the morning of March 21, not far from low of $183 on March 25.
The metal fell to its lowest level since December 1997 as disgruntled car manufacturers continued to shun the metal they had pushed in September 2001 to more than $1,000 an ounce in favour of what some still see a secure supply of substitute platinum.
The latest tumble in palladium, long bedevilled by worries about supply from major producer Russia, has been exaggerated by illiquid market conditions and the general flight away from safe-haven commodities such as gold and platinum group metals.
Although palladium may recover marginally and limp back over the $200-an-ounce level, dire fundamentals look set to keep the metal under pressure for years, analysts said.
Car-makers, the metal’s main consumer, are thought to have ample stocks despite having offloaded inventories last year and demand prospects for that sector are less than rosy.
US giant Ford announced a 17 per cent cut in second-quarter output two weeks ago, while General Motors estimated a drop of 10.5 per cent for the same period. On top of that, consumer confidence in the United States fell last week to nine-year lows.
Sales of new cars in Western Europe fell 5.3 per cent in the first two months of 2003, with Britain suffering the worst decline in February, where sales dropped 5.8 per cent and are down 8.1 per cent for the first two months of the year.
