LONDON, 17 August 2003 — Oil prices fell this week on signs of a pickup in Iraqi exports and an unexpected rise in US crude inventories. But massive power outages in eastern North America gave the market a boost late in the week as traders fretted about possible disruption to refinery operations.
Gold prices rose as a combination of factors helped to cushion the precious metal from improved optimism toward the dollar. Among the soft commodities, grain prices garnered support from the heat wave wreaking havoc across Europe.
Gold: Gold prices advanced as the prospect of more producer de-hedging as well as bond market volatility and renewed terrorism fears lent support, analysts said.
On the London Bullion Market, the price of an ounce of gold stood at $364.50 on Friday afternoon, against $353.95 the previous week. “Finally, the gold price has moved away from the driving force simply being the exchange rates,” said SG Securities analyst Stephen Briggs.
“Gold prices have risen in dollar and in euro terms in the past week. “One factor is producers de-hedging.” South African giant AngloGold has said it will reduce the hedge book of Ashanti Goldfields if its agreed takeover bid for the smaller rival succeeds.
The unwinding of hedge positions — the selling of gold on the futures market to get a guaranteed price in advance — by the likes of AngloGold has been one of the drivers behind the gold price rally over the past couple of year, analysts say.
“Another factor is even though the stock markets are quite firm, the bond markets remain a bit of a mess, so people and especially hedge funds are looking for some places to put their money,” said Briggs.
Silver: Silver prices ended the week slightly lower. On the London Bullion Market on Friday silver prices stood at $5.015 per ounce against $5.050 the previous week. “It’s been very volatile and should remain so,” said Briggs. “It benefits from the recovery of base metals, which suggests that stronger industrial demand is expected. But the fundamentals remain poor.”
Platinum and Palladium: Platinum prices flirted with new highs amid tight supplies, though palladium prices stagnated. By Friday afternoon, the price of an ounce of platinum had risen to $699.5 from $680.0 a week before. “Platinum is very strong, and very close to $700 and a new record level,” said Briggs.
If the metal tops $705 it will beat a 23-year high set in March. “The market is still very tight. It is also supported by gold rally.” Palladium stood at $176 an ounce against $175 the previous week.
Base Metals: Base metal prices saw mixed fortunes, torn between rising optimism about prospects for the world economy and concerns about a probe into the aluminum market.
The London Metals Exchange had announced the previous week that it would look at possible collusion among traders in the aluminum market. “The LME, which started an investigation into the aluminum market two weeks ago, has not yet solved the problem,” said Briggs.
“The prices had weakened sharply after the announcement but has climbed back again, helped by the other metals. “The other metals, particularly copper and nickel, have been supported by an increase in optimism about the world economy, especially the US and Japanese economies.”
Late on Friday, on the LME, three-month copper prices stood at $1,750 per ton against $1,775 a week earlier. Three-month aluminum prices rose to $1,429.5 per ton from 1,425. Three-month nickel prices gained to $9,240 per ton from $9,070. Three-month zinc prices weakened to $823 per ton from 856. Three-month lead prices slipped to $481 from $510. Three-month tin prices dipped to $4,830 per ton from $4,840.
Oil: Oil prices eased back amid signs that Iraq’s ramshackle oil industry is slowly getting back on its feet. In Turkey, an Energy Ministry official said Iraq had begun pumping oil from a pipeline running from its northern Kirkuk field to the Turkish Mediterranean port of Ceyhan on Wednesday.
The pipeline was expected to have a capacity of between 200,000 and 300,000 barrels per day, according to an official of the US-led coalition in Iraq. A surprise rise in US crude oil stock levels also helped to calm worries about possible supply shortfalls. The US Department of Energy estimated the rise at 200,000 barrels to 280.4 million from the previous week, while the private American Petroleum Institute put it at an even bigger 3.2 million barrels to 281.3 million.
The rise confounded expectations of a fall in crude stocks, though gasoline inventories dropped in line with analyst forecasts, by 3.7 million barrels to 198.1 million according to the DoE. But prices regained some lost ground toward the weekend amid nervousness about historic power outages in America that poured more fuel on a rally in the gasoline market.
“There are reports of refineries being knocked down because of the power cut in the northeast coast of the US, but I don’t think it is significant,” said Commerzbank analyst Jon Rigby.
By Friday, the price of benchmark Brent North Sea crude oil for October delivery stood at $29.08 a barrel in London from $29.73 a week earlier. In New York, the reference light sweet crude September contract dropped to $31.30 per barrel from $32.75.
Rubber: Rubber prices rose on robust demand which helped the commodity overcome a seasonal decline usually seen at this time of year. “Traditionally August has been a period when prices dip because of generally good production and a lack of buyers due to holidays,” said Martin Hampson from brokers Symington. “But this year it hasn’t happened. The market has gone up seven percent since Aug. 1.” Even though production has recovered a little, there’s been strong demand from China, Hampson added.
In Kuala Lumpur, the RSS 1 index stood at 3.780 ringgit per kilo on Thursday from 3.760 ringgit the previous week.
Cocoa: Cocoa prices perked up after hitting the lowest level in over a year the previous week. “The market was propelled by a lack of selling as it apparently seeks to build a base from which to move higher,” said analyst Ann Prendergast at brokers Refco.
On LIFFE, London’s financial futures exchange, the price of cocoa for December delivery firmed to 967 pounds a ton on Thursday from 951 the previous week. On the CSCE, the New York futures market, the December contract gained to $1,481 per ton from $1,446.
Coffee: Coffee futures sank on expectations of more clement weather in Brazilian producer regions. “Weighing on the market is the failure of frost to develop in the Brazil coffee growing areas over the winter months,” said Refco’s Prendergast. “Although temperatures have dropped of late warmer weather is now expected in the coffee growing areas.”
Sugar: Sugar futures continued on a losing streak as speculative funds kept selling, analysts said. On LIFFE, the price of a ton of white sugar for October delivery fell to $198.20 from $201.60 a week earlier. On the CSCE in New York, a pound of unrefined sugar for October delivery slipped back to 6.51 cents from 6.79 the previous week.