LONDON, 10 August 2003 — Oil prices gushed up to the highest level since the war in Iraq this week amid worries about tight supplies and terrorism.
Elsewhere, activity was muted with the summer lull taking hold of many financial centers, leaving most of the metals and soft commodities fairly range bound.
Gold: Gold prices dug their heels in after sliding the previous week, helped by fresh signs of weakness in the US dollar and renewed terrorist worries after bomb blasts in Indonesia and Baghdad, analysts said. On the London Bullion Market, the price of an ounce of gold stood at $353.95 on Friday afternoon, against $352.35 the previous week.
“Dollar weakness has given the gold market a boost ... after a stronger euro and silver price, together with the bomb attack on the Jordanian embassy in Iraq encouraged fresh buying,” said James Moore at specialist website The BullionDesk.com.
“The yellow metal seems comfortable enough trading (within a range of) $348-55 as the holiday season slows trade activity.”
But concerns about jewelry demand in India were raised by a report in the Times newspaper saying that the Hindu marriage arrangements between mid-June and late October “would almost certainly be doomed to failure.” Many would-be brides and grooms are now delaying their weddings, the paper reported.
India’s annual Hindu wedding market is estimated to be worth a staggering 300 billion rupees ($6.25 billion) with gold ornaments as gifts to brides gobbling up more than half the expenditure.
Silver: Silver prices retreated slightly on the back of speculative book squaring, analysts said. Silver was trading on the London Bullion Market at $5.05 an ounce on Friday against $5.12 the previous week.
“We remain concerned that silver could come under future selling pressure although the metal continues to find support during US trading, although not always during European and Asian trading,” said Reade.
Platinum and Palladium: The platinum group metals continued to trade within a narrow range in light deals. “We continue to expect platinum to trade lower over the coming weeks,” said Reade. “We remain positively disposed to palladium in the medium term. However, the short-term fortunes of this very illiquid market remain very hard to call.” By Friday afternoon, the price of an ounce of platinum stood at $680 from $677 a week before. Palladium stood at $175 an ounce against $182 the previous week.
Base Metals: Base metal prices headed lower with news of a probe into the aluminum market and a labor dispute at the world’s biggest copper mine causing some jitters. The London Metals Exchange announced it would look at possible collusion among traders in the aluminum market. The LME said it would scrutinize inventory levels, individual trading patterns and the price curve.
“The focus of many in the base metals sector is locked on the LME’s probe of the aluminum market,” said Barclays Capital analyst Ingrid Sternby, warning that the investigation could hit prices.
“The trend amongst many brokers over recent weeks has been to follow the main market participants and build up long nearby positions, so there is a big risk that if these are liquidated en masse then aluminum prices could adjust sharply lower,” she said.
But the complex garnered some support late in the week from a labor dispute at Chile’s Escondida, the world’s biggest copper mine, where workers looked set Friday to strike after they rejected the latest pay offer, analysts said.
“Our view is that the base metals market has overreacted to the strike news,” said Sternby. “Unless the strike lasts more than a month the mine should be able to comfortably catch up to its full-year production target because it is operating well below capacity at present.”
Late on Friday on the London Metal Exchange (LME), three-month aluminum prices stood at $1,425 per ton from $1,438 a week earlier. Three-month copper prices dipped to $1,775 per ton from $1,792. Three-month nickel prices eased to $9,070 per ton from $9,300.
Three-month zinc prices weakened to $856 per ton from $874. Three-month lead prices slipped to $510 from $525. But three-month tin prices rose to $4,840 per ton from $4,830.
Oil: Oil prices reached the highest level since the run-up to the war in Iraq in March in both London and New York as traders fretted over the low levels of gasoline stocks and renewed terrorist attacks.
By Friday, the price of benchmark Brent North Sea crude oil for September delivery stood at $30.48 a barrel in London from $28.83 a week earlier. In New York, the light sweet crude September contract rose to $32.75 per barrel from $31.08.
Bomb blasts in the capitals of Indonesia and Iraq sparked some jitters, even though oil activities were not affected in either producer.
Peter Gignoux, head of energy trading at Citigroup, said Thursday’s blast outside the Jordanian embassy in Baghdad had nevertheless lent support to the oil price. “Oil doesn’t like terrorism, we are unsure who perpetrated this — are they Iraqi dissidents, are they Al-Qaeda?” he said. “When you have terrorist acts in oil-producing countries, it upsets the market.”
Worries about the low level of US inventories as winter edges nearer in the northern hemisphere also kept prices well bid. The US government said inventories of gasoline had declined 2.7 million barrels, or 1.3 percent, the previous week and “are now well below the normal range for this time of year.” Commercial stores of crude oil swelled 2.9 million barrels, or 1.0 percent.
“Now we are headed for the winter. We are just not building fast enough,” said Energy Ventures Analysis market analyst Stephen Thumb.
Meanwhile, acting Iraqi oil ministry chief Thamer Ghadhban said the country would “very soon” resume pumping crude through a key pipeline from northern Kirkuk oilfields to the Turkish Mediterranean terminal of Ceyhan. Ghadhban said Iraq was now exporting 700,000 barrels of oil per day from Basra in the south.
Rubber: Rubber prices headed upward over the week as weather conditions in major world producer Thailand raised concerns over supply.
“The main theme has been the rain situation in Thailand, which has tightened supplies, although the last two days have been better,” said Rashid Ahmed from brokers Symington. In generally quiet trading, speculative purchases had otherwise been the driving force, he added.
“Speculators have been very active on the Tokyo exchange because Japanese stocks are lower than they were at the same time last year. It has encouraged buying activity,” he said. In Kuala Lumpur, the RSS 1 index stood at 3.760 ringgit per kilo on Thursday from 3.735 ringgit the previous week.
Cocoa: Cocoa prices continued to decline over the week, slipping to their lowest level since January 2002 as profit-taking eroded mid-week gains amid general market weakness.
“Cocoa prices broke out of their range on Wednesday in an empty frenzy of wishful buying, but turned back on themselves to reassert the downtrend that the market has been evading all week,” said Refco analyst Ann Prendergast.
Crop reports from major suppliers the Ivory Coast and Ghana, which traders had been awaiting, now seemed less relevant amid the price gloom, she said. “The market’s inability to sustain the highs ... signals the market’s inherent weakness and strongly suggests an impending rout,” she warned.
On LIFFE, London’s financial futures exchange, the price of cocoa for September delivery slipped to 928 pounds a ton on Thursday from 938 pounds the previous week. On the CSCE, the New York futures market, the September contract edged down to $1,462 per ton from $1,465.
Coffee: Coffee futures gained on indications that the 2003 crop from major world producer Brazil will be less than expected. “Traders cite an improved fundamental outlook within the Brazil crop, believed to have fallen below 30 millions bags,” said Refco’s Prendergast. “This is likely to spur buying interest from speculators,” she added.
The current expected crop compares with one of 55 million bags in 2002. On LIFFE, Robusta quality for September delivery rose to $721 per ton from $713 the previous week. On New York’s CSCE market, Arabica for September delivery increased to 64.45 cents a pound from 63.45 cents the previous week.
Sugar: Sugar futures dipped as speculative funds, which had been supporting prices for around a month, launched into a turnaround. “On Thursday, we saw a quite sharp sell-off,” said John Kovaks from specialist sugar brokers Czarnikow. “We saw a large amount of selling with virtually no buying activity.”
Grains and Soya: Grain prices generally increased over the week, with European producers battling the especially hot and dry conditions which have blanketed the continent in recent weeks.
