Oil

Opec member countries plan to invest about $130 billion by 2012 to raise oil output to meet rising demand. Opec member countries have over 900 billion barrels or more than 78 per cent of the total proven crude oil reserves of some 1.2 trillion barrel.Opec studies have shown that world oil demand is projected to rise from the current 83.3 million bpd to 89.7 million bpd by 2010, to 96.5 million bpd by 2015, 103.5 million bpd by 2020 and 117.6 million bpd by 2030. This is an increase of 33.4 million bpd during a period of slightly more than 20 years. Given this demand, member countries have embarked upon capacity expansion programmes to meet future demands.

Oil has surged above $70 a barrel from around $50 in January and is within sight of its August 2006 all-time high above $78. US gasoline prices have been the main driver in this year’s rally as refiners struggled to build stocks to meet peak summer demand in the world’s top consumer.

US crude inventories are at their highest in more than nine-years, however, according to data published recently. The figures appear to support Opec’s view that refinery bottlenecks are to blame for high prices.

In the week ended June 24, oil prices endured a volatile week before ending on a mixed note. The strong gains were won mostly on concerns about tight gasoline supplies in the United States and unrest in Nigeria.

In London, Brent North Sea crude for August delivery reached $72.25 per barrel, a price last seen on August 28, 2006.

New York’s main oil futures contract, light sweet crude for delivery in July, soared to $69.05 per barrel — the highest point since September 5, 2006.

Prices then began to slip on June 20 after the US Department of Energy (DoE) said that crude oil stockpiles grew by 6.9 million barrels in the week ended June 15. Most analysts had expected a drop of 50,000 barrels.

“Oil prices fell back following a rise in US crude inventories, confirmed Barclays Capital analyst Kevin Norrish. The DoE meanwhile added that stockpiles of US gasoline jumped by 1.8 million barrels last week, beating the market consensus forecast of 1.2 million barrels.

Traders are closely following the supply of gasoline amid peak demand for motor fuel during the ongoing US summer driving season when Americans throng highways en route to their holiday destinations.

Gold

In the London market, gold fell to its lowest in more than three months and silver hit a five month trough on June 26, as softer oil prices and weakness in other metals triggered technical selling.

Dealers said expectations of higher interest rates around the world also dampened sentiment, with the metals vulnerable to further drops before recovering. Spot gold fell as low as $642.50 an ounce, its weakest since March 14.

A fall in gold price to the $645 area might increase the chance of an acceleration down towards the low $630s said Stephen Briggs, economist at SG Corporate and Investment banking.

Meanwhile silver prices fell as low as $12.35 an ounce, the weakest since mid January. Traders said silver took direction from copper, which fell more than one per cent, and a decline in gold prices. Silver failure to hold current levels might trigger further selling, pushing prices towards $12, dealers said.

Copper/Lead

Copper moved lower in the London market, to a low of $7240 a ton after an increase of 1,200 tons in LME stocks suggesting Chinese copper demand is lacklustre currently.

However, concerns about strikes in Latin America led to a price recovery. Workers at several facilities operated by Southern Copper in Peru launched strike action last weekend and subcontractors are trying to disrupt production at mines operated by Codelco, the state-owned Chilean mining giant. Copper rose 0.4 per cent to $7,465 a ton.

LME inventories fell 1,775 tons to 117,825 tons, less than three days’ global consumption and down about 100,000 tons since early February. On the other hand, the market seemed to shrug off the bearish news of Chinese copper imports slowing down.“Imports data did not have much of an impact on prices, it is offset by possible strikes,” an LME trader said. China’s refined copper imports in May rose 148 per cent to 116,749 tons from a year ago, but fell by 37 per cent compared with April imports of 186,212 tons.

Copper has shed some 16 per cent since early May, when it hit an 11-month high of $8,335 and prices have been wobbling around current levels for the past weeks with market lacking fresh impetus.

Lead, which has set a fresh record high of $2,550 a ton on June 21, was up $50 at $2,510. Analysts said despite the fundamentals easing, prices could go up as fresh speculative money entered the market.

The metal, which is mainly used in battery consumption, has gained more than 50 per cent since the start of the year. Also anticipation of Magellan mine remaining shut in the near future adds to the tight market conditions.

On March 25, lead surged 6.3 per cent to a new record at $2,700 a ton. Barclays Capital said Chinese demand was strong and buying elsewhere in Asia was robust but physical markets in Europe and North America were weak. Barclays said price spikes were likely in the short-term but if prices continued to ignore softer market conditions outside Asia, it could spell danger.

Coffee/Cocoa

Coffee prices were robust, trading around their highest level since 1998 in London. On the LIFFE, London’s futures exchange, Robusta prices had leapt to $1,940 a ton on June 12 — which was last seen nine years ago.

Coffee prices in London have surged amid market worries over lower exports from Vietnam, which is the world’s second-biggest coffee producer after Brazil. By June 22 on the LIFFE, Robusta quality for September delivery leapt to $1,915 a ton, from $1,853 a week for the July contract one week earlier. On the Nybot, Arabica for September delivery added to 115.85 US cents a pound, from 115.40 cents.

Meanwhile cocoa prices drifted lower as traders took profits from gains made the previous week. However, prices were supported by market concerns over number one producer Ivory Coast, where unusually hot and dry weather at the start of the year has sparked market fears of a drop in production.

By June 22 on the LIFFE, the price of cocoa for September delivery dipped to £1,060 a ton, compared to £1,077 a week earlier when the most traded contract was for the month of July.