LONDON, Nov 16: Oil prices tumbled to an eight-month nadir here this week after Baghdad agreed to a tough new UN resolution on disarmament, prompting traders to scale back their expectations of a war in Iraq.
Signs that the Opec oil cartel is pumping significantly more oil than its official ceiling also weighed on the market.
Gold briefly hit a two-month high on dollar weakness and geopolitical concerns, but failed to sustain the brief burst of momentum.
The platinum group metals were also in focus as a closely watched industry report underscored the differing fortunes of the sister metals.
GOLD: Gold prices ran up to two-month highs this week on the back of a weaker dollar and nervousness over Iraq, but the rally ran out of steam and prices finished the week slightly lower.
Gold prices were fixed at $318.60 per ounce on the London Bullion Market on Friday afternoon against $321.70 the previous week. On Wednesday prices rose to as high as $324 an ounce.
Iraq concerns and dollar weakness have been the main driver of gold prices this week, said Barclays Capital analyst Ingrid Sternby.
Prices eased back however after Baghdad agreed to a tough new UN Security Council resolution on disarmament and the return of weapons inspectors.
As soon as the Iraqi crisis threat had disappeared, prices went down, said Sternby.
Analysts said a modest rebound in the value of the dollar towards the end of the week had also weighed on gold prices.
SILVER: Silver prices held steady. Silver was fixed on the London Bullion Market at $4.55 an ounce on Friday afternoon against 4.5875 the previous week.
PLATINUM AND PALLADIUM: Platinum prices got a shot in the arm from a rosy outlook painted by a closely watched report from brokers Johnson Matthey, which painted a bleaker picture of prospects for palladium.
By Friday, an ounce of platinum stood at $600 on the London Platinum and Palladium Market against $588 a week earlier.
Palladium prices traded for $292 per ounce from $300 a week earlier.
The report forecast a range of $550-650 for the platinum price through the next six months.
Although the economic outlook remains uncertain, the physical market should remain tight, it said.
Demand for platinum is seen outstripping supply in 2002 for the fourth year in a row while demand for palladium was set to slide to an eight-year low.
Total demand for platinum should rise by 2.9 per cent in 2002 to 6.37 million ounces, led by robust demand for platinum jewellery in China.
But demand for palladium in 2002 is expected to fall by 28 per cent to 4.88 million ounces.
The continued weakness of demand relative to late 1990s levels and the possibility of increased Russian sales in 2003 will continue to act as a buffer to the (palladium) price in the short term, keeping it in the range between $250 and 350 for the six months ahead, the report predicted.
BASE METALS: Leading base metal prices were confined to relatively narrow ranges once again this week in thin trade, though prices edged slightly higher towards the end of the period following relatively healthy US economic data and firmer stock prices.
If you look at the week as a whole, it’s been pretty directionless actually, said Societe Generale analyst Stephen Briggs.
OIL: Oil prices slid to the lowest level for eight-months in London and also fell sharply in New York as traders revised down their expectations of a war in Iraq after Baghdad agreed to a tough new UN resolution on weapons inspections.
By Friday afternoon, benchmark Brent North Sea crude oil for January delivery had dropped to $23.21 a barrel here against $23.49 a week earlier.
In New York, December-dated light sweet crude futures traded at $25.22 down from $25.65 a week earlier.
Now that Iraq has accepted it’s removed one more factor which could have caused a military attack, said Lawrence Eagles, analyst at brokers GNI.
We’re now in a position where we’ve got to wait for the inspectors to come in to do their job. It’s going to be weeks or months before we have any definitive indication of what’s going to be happening as far as the inspectors are concerned.
Having accepted the resolution it’s highly unlikely that the inspectors are going to be impeded in their work, certainly in the initial stages, he told AFP.
Concerns that a war in Iraq could lead to disruptions to Middle East oil supplies sent prices soaring up towards $30 a barrel earlier this year amid sabre-rattling between Baghdad and Washington.
Traders are now looking ahead to a meeting of oil ministers of the Organization of Petroleum Exporting Countries (Opec) next month in Vienna where they expect delegates to aim for tighter respect for quotas.
The International Energy Agency said Tuesday that the 10 members of the Organization of Petroleum Exporting Countries, excluding Iraq, had exceeded their production quota by 2.5 million barrels per day (bpd) in October.
RUBBER: Rubber prices held steady in a well-balanced market, traders said.
In Kuala Lumpur, the RSS index was unchanged on the previous week at 3.100 ringgit per kilo.
COCOA: Cocoa prices retreated further from recent high points this week as the market monitored unrest in Ivory Coast, the world’s leading producer.
Cocoa futures prices rose sharply in response to news that rebels in Ivory Coast had rejected a peace agreement, but the failure to generate follow-through buying took the starch out of the rally and the market drifted back, said refco analyst Ann Prendergast.
COFFEE: Coffee prices were mixed this week, with the price of Robusta jumping in London to its highest level in two years while New York prices fell back.
Coffee futures settled sharply higher (in London) as speculator, trade and local buying combined ... to run the contract up to two-year highs, said Refco analyst Ann Prendergast.
The gains were accelerated by a positive technical outlook and a lack of origin selling ahead of a delayed Vietnam Robusta crop, due to hit the market in the middle of December, she added.
SUGAR: Sugar prices fell this week as speculators booked profits after prices rose the previous week to their highest level in a year.
The funds have unloaded a lot of their long positions. Now I think we’re going to test lower levels, said Czarnikow analyst John Kovaks.
On LIFFE, a ton of white sugar for March delivery fell to $196.10 on Thursday from $205.20 a week earlier, having hit a seven-week low of $190.10 on Wednesday.
On the CSCE in New York, a pound of unrefined sugar for March delivery declined to 6.87 cents from 7.72 cents the previous week.
SOYA: Soya prices fell this week following upward revisions to estimates of the size of stockpiles held in China and South America, although prices recovered some ground towards the end of the week.
AG Edwards analyst Victor Lespinasse said the slide in prices was attributable to the upward revisions in the US agriculture department’s stock estimates.
GRAINS: Wheat prices recoiled in the United States owing to an upward revision to US estimates of stock levels in China, traders said.
US-based analyst Victor Lespinasse at brokers AG Edwards said prices had been undermined by news that the US agriculture department had raised its estimate of Chinese wheat stocks from 19 million tons to 61 million.
But prices pared losses towards the end of the week thanks to technical buying and orders for 90,000 tonnes of US wheat from Taiwan and 18,000 from South Korea.
Maize prices climbed thanks to technical factors and rumours that Australia has bought 200,000 tons of US maize.
In Chicago a bushel of wheat for December delivery eased to 391.25 cents from 397 cents a week earlier.
A bushel of maize in Chicago for December delivery picked up to 244 cents from 241 the previous week.
On LIFFE, the price of a tonne of wheat for November delivery dipped to 58.1 pounds from 60.50 a week earlier.
COTTON: Cotton prices continued to draw strength from recent rains in US growing regions which have delayed the harvesting of this year’s crop, though analysts see limited scope for further gains.
Cotton futures’ natural tendancy is to drift lower, barring the erratic influence of fund longs, who persist in playing the long side, looking for a wet weather premium, said analysts at brokers Refco.
We believe that the heavy speculative position, weak domestic demand, lagging export sales, and a slow economic recovery will see prices lower.
In New York, the December contract rose to 47.67 cents a pound on Thursday from 47.60 the previous week.
The Cotton Outlook Index of physical cotton, the average of the world’s lowest prices, was unchanged at 51.50 cents a pound.
WOOL: Australian wool prices dropped 2.3 per cent on average at auction sales in Sydney and Melbourne, giving back the previous week’s gains, the Australian Wool Industries Secretariat (AWIS) reported.
This reflected the lower quality of the offering and some over-optimistic expectations of the market.
Major buying demand once again came from China and the topmakers. Buyers for Korea and India were active on the better wools. Reports from Europe were more subdued this week, it said.
The Australian Eastern index fell to 11.44 Australian dollars per kilo on Thursday from $11.71 a week before.
But the British Wooltops index climbed to 562 pence from 553 pence. — APP