LONDON, Nov 17: Oil prices slumped to their lowest point for more than two years as Opec threw down the gauntlet to independent producers over excessive global production, in a move which analysts predict will result in a price war.
Crude prices slumped 15 per cent in London and more in New York, at one point falling below $17 a barrel for the first time since June 1999, after Opec warned rivals they would not cut production unless non-Opec producers pledged a cut of their own.
Elsewhere, metal prices were encouraged by the fall of Kabul which raised hopes of an improved global security outlook which would foster more rapid economic recovery.
Gold rallied immediately after the US plane crash in New York, but fell back after it appeared unlikely that terrorism was involved.
GOLD: A stronger dollar sat on gold prices again this week, with demand expected to be lacklustre during the holy month of Ramadan, which started Friday.
Prices spiked up briefly above $280 an ounce immediately after the US plane crash in New York on Monday, but soon fell back to earth as signs pointed towards an accident rather than terrorism as the cause of the tragedy.
By Friday afternoon, an ounce of gold stood at $274.5, down from $277.15 a week earlier.
You’ve got dollar strength and you’ve also got very, very weak physical demand, said HSBC metals expert Alan Williamson.
The World Gold Council reported a fall of 755 tons, or seven per cent, in global gold demand in the third quarter from the year-earlier period, taking demand for the year-to-date to 2,356 tons, two per cent below that for the first three quarters of 2000.
SILVER: Silver prices ended the week little changed.
An ounce of silver was going for $4.1175 on Friday afternoon, from $4.1050 the previous week.
PALLADIUM AND PLATINUM: The platinum group metals (PGMs) picked up slightly but held within the tight corridor established in recent weeks.
By Friday, platinum prices stood at $427 an ounce from $422 a week earlier.
Palladium was quoted at $336 an ounce from $323 the previous week.
Traders were mulling the influential annual report from the Johnson Matthey brokerage, but in the event it did not move the market.
Demand for platinum is set to swell five per cent to a record high of 5.94 million ounces in 2001, the group predicted.
Platinum supplies are expected to grow by five per cent in 2001 to above 4.0 million ounces for the first time as new mining projects in South Africa come on stream.
Supply is seen as falling by three percent to 7.53 million ounces.
BASE METALS: Base metals extended their recent rally amid renewed optimism about the global economic and security outlook after the fall of the Afghan capital Kabul.
But lingering worries about the demand impact of the economic downturn capped gains.
There’s no doubt that the events earlier on in the week helped prices, said HSBC metals expert Alan Williamson.
Particularly the fall of Kabul and the growing idea that you might get a rebound in consumer confidence, he added.
That had poured fuel onto the rally sparked by the latest production cuts in the copper industry announced last week, he said.
Unfortunately it’s still pretty unclear as to how long this current downturn will be, he told AFP.
Three-month aluminium prices climbed to $1,365 a ton from $1,276 while nickel jumped to $5,380 from 4,720.
Elsewhere in the complex, zinc firmed $43 to $816, lead added two dollars to $488 and tin climbed $100 to $4,050.
OIL: Oil prices sagged to levels below $17 a barrel not seen since June 1999, as a price war between major global producers broke out into the open.
Brent North Sea crude for January delivery tumbled heavily on Wednesday and Thursday before settling somewhat later in the week. On Friday afternoon it was quoted at $17.30 a barrel, down sharply from $21.54 a week earlier.
In New York, December-dated light sweet crude futures fell to $17.70 from $21.50 the previous Friday.
The market reacted to dire predictions of a market crisis after the Organization of Petroleum Exporting Countries (Opec) refused to cut production until rivals outside the 11-nation club agreed to reduce their volumes.
The prospect is that if non-Opec don’t cut, then Opec won’t cut and then we’re down to $12 a barrel, said London-based trader Jim Chilcott.
RUBBER: Rubber prices eased gently this week, as global demand remained thin and the weakening Indonesian rupiah made for cheaper supply on international markets.
In Kuala Lumpur, the RSS index ended Thursday at 2.165 ringgit per kilo from 2.175 ringgit the previous week.
In Indonesia particularly levels are easing partly due to the devaluing Indonesian rupiah and that is expected to lead the market down, said London-based trader James Heyworth.
SUGAR: Sugar prices consolidated gains this week as investment funds continued to cover positions following the damage wrought in Cuba by Hurricane Michelle.
On the LIFFE market in London, a ton of white sugar for March delivery climbed to $236 on Thursday from $233 a week earlier.
On the CSCE in New York, a pound of unrefined sugar for March pushed higher to 7.36 cents from 7.26 cents the previous week.
GRAINS: US wheat prices fell back in Chicago this week as the market braced for the newly harvested crop to hit the market. Maize prices turned up despite a drop in US exports.
In Chicago, a bushel of wheat for December delivery fell to 280.25 cents from 288.75 the previous week.
A bushel of maize in Chicago for December delivery picked up to 206.00 cents from 202.75 cents a week earlier.
COTTON: Cotton prices found some strength this week, amid largely technical factors, but remain weak because of a glut on the market.
In New York the December contract rose to 34.26 cents a pound on Thursday from 32.15 cents a pound the previous week.
The Cotton Outlook Index of physical cotton, the average of the world’s lowest prices, rose to 38.20 cents from 35.50 last week.
WOOL: Australian wool prices fell sharply this week, as Chinese buyers, who have in any case all but exhausted their import quotas, were deterred by the strength of the Australian dollar.
The Eastern index slid to 697 cents a kilo from 708 cents the previous week.
The British Wooltops index eased to 349 pence from 352 pence a week earlier.
China is the foremost buyer of Australian wool, purchasing one third of annual production.—AFP