IN the London market, oil rose above $72 a barrel on June 28, after a United States government report showed a big fall in crude inventories and a surprise drop in gasoline stocks, renewing supply worries during peak summer demand.
Crude inventories fell a larger than-expected 3.4 million barrels towards the third week of June, the Department of Energy reported. Gasoline stocks fell by 1 million barrels, countering expectations of a small increase. The US crude was up 72 cents at $72.64 a barrel, while London Brent crude rose 84 cents to $71.82.
Prices also rose as the closure of a key shipping channel in Lousiana limited output at three refineries before the July 4 Independence Day holiday when travel is expected to be busier than ever. Part of the channel has reopened.
The Citgo Petroleum Corp. said on June 20 that the Energy Department approved a 250,000-barrel loan from the national Strategic Petroleum Reserve for its 440,000-barrel per day (BPD) refinery in Lake Charles, Louisiana.
The US gasoline demand remains robust, running at a record 9.5 million barrels a day, inspite of high pump prices. The American Automobile Association forecast that 41 million Americans would travel 50 miles or more during the Independence Day weekend, an increase of 1.2 per cent over last year.
The strength of demand means that market sensitivity to gasoline supply disruptions remains high. Deliveries from three refineries and a liquefied natural gas terminal have been interrupted following an oil spill in the shipping channel connecting the refining hub of Lake Charles, Lousiiana, with the Gulf of Mexico. Some of the companies involved have requested loans from the US’s strategic reserves to tide them over. Crude stocks also declined by more than expected with a fall of 3.4 million barrels, retreating from an eight-year high.
The Organisation of the Petroleum Exporting Countries will pump 29.7 million bpd in June, up from revised 29.4 million bpd in May, said Conrad Gerber, head of the Geneva-based consultancy which tracks oil shipments.
Most Opec members were pumping near full tilt earlier this year to cool prices that hit a record high of $75.35 a barrel in April. In June, Saudi Arabia is expected to pump 9.1 million bpd, up about 100,000 bpd from May.
Iran is also pumping more. Supply from Opec’s second largest producer is expected to rebound to 3.8 million bpd in June. Iran pumped 3.6 million bpd in May, less than earlier expected, because of limited demand for its heavier crude.
Iraq is expected to pump 1.9 million barrel per day in June, largely stable since May, leaving supply from the quota-bound members of 27.8 million barrel per day.
Copper initially rose after two moderate earthquakes hit the city of Anto fagasta in Chile, although there were no reports of output disruption from one of the world’s main producers. Helped by a 2000 tonne decline in London Metal Exchange stocks, copper reached a high of $7,105 a tonne before reversing to trade 1.7 per cent lower at $6,880.
The International Copper Study Group said the copper market was in surplus by 64,000 tonnes in the first quarter of 2006, compared with a deficit of 89,000 tonnes in the same period last year. Traders said the figures had to be treated with caution as consumption data were often revised up and there was no evidence of the surplus appearing in warehouse stocks.
Gold
IN the London market, gold rose 1.7 per cent to a two-week high in Europe on June 28. Spot gold touched a high of $595.60 an ounce and was at $595.45/596.45 range fro the past two weeks, as the market digested a tumble from May’s 26 year high of $730.
The US Federal Reserve was seen raising interest rates by a quarter percentage point to 5.25 per cent in its 17th straight rate rise on June 29, but there was speculation about a half-point increase.
Traders would also scan the language used at the meeting for signals about future policy. Higher US interest rates support the dollar and may diminish gold’s allure as an investment.
But investment bank Barclays Capital said it had decided to make some downward adjustment to its gold price forecast, linked to Barclays economists’ recent upward revision in the fed funds rate forecast to 6.0 per cent.
Meanwhile, the dollar has won back 3.7 per cent of its value against the euro since the start of June. A strengthening US unit makes commodities price in the US unit on world markets more expensive for buyers using other currencies.
Meanwhile, the price of silver has plunged by 34 per cent since the precious metal reached a 26 year high of $15.22 on May 11. On the London Bullion Market, silver prices dropped to $10.09 per ounce on June 23 fixing from $10.28 the previous week.