LONDON, 4 July 2004 — Oil prices reversed initial losses to bolt higher this week as worries about low inventories in the United States reappeared and relief over the handover of power in Iraq proved short-lived. Gold and other precious metals lost some luster, knocked by swings in the value of the dollar.
The Commodities Research Bureau’s index of 17 commodities fell to 269.36 points on Friday from 271.67 a week earlier.
Gold: Gold prices raced ahead to the highest level for two and a half months near the start of the week, but failed to sustain the gains. By Friday gold prices stood at a fixing of $397.75 per ounce on the London Bullion Market against $401.50 a week earlier.
Prices reached a fixing of $404.25 on Monday, a level not seen since April 19. But they tumbled by almost $10 an ounce on Tuesday as the US unit rebounded against the euro and yen.
The formal end to the US occupation of Iraq two days earlier than scheduled helped calm terrorist jitters, eroding some of gold’s attraction as a “safe-haven”. But few traders were expecting an end to bloodshed in the war-ravaged country any time soon.
“The handover to the interim Iraqi government occurred without significant incident but this clearly will not end the violence there and this will continue to act as a secondary source of support for gold, largely as a result of the general uncertainty and threat to Iraqi oil supplies that this maintains,” said Barclays Capital analyst Kamal Naqvi.
Silver: Silver prices took their cue from gold. “There had been some buying initially, in line with gold, but this peaked at 6.17 and when gold began to move lower, then silver quickly dropped,” said Naqvi. “Silver has managed to scramble back from earlier weakness ... but will continue to take its direction from the yellow metal.” Silver prices fell to $5.885 per ounce on Friday from $6.150 a week earlier.
Platinum and Palladium: The Platinum Group Metals (PGMs) skidded lower, with speculative selling sending palladium to a five-month low. “The platinum metals continue to be pressured by selling interest,” though platinum fared better than its sister metal, noted Naqvi.
“It is now palladium’s turn to suffer most from long liquidation and prices have now fallen towards $210 and much, as we eventually saw with platinum, will depend upon if and when consumer buying interest arrives in sufficient strength to arrest the decline.” By Friday, platinum prices stood at $776 per ounce on the London Platinum and Palladium Market from $806 a week earlier. Palladium prices dollars stood at $210 per ounce against $224 the previous week.
Base Metals: Base metal prices traded in a narrow range, with copper a touch weaker as traders monitored the threat of a strike at the Collahuasi copper mine in Chile.
“Buoyed by strike fears in recent days, copper prices eased as union workers at the Collahuasi mine in Chile cancelled plans to strike after the company requested government intervention that will extend contract negotiations for another five days,” said Barclays Capital analyst Ingrid Sternby. Discussions were also underway to try to ward off a strike at another Chilean mine in Asarco, she added.
Aluminum prices softened slightly and may weaken further in the near term if poor sales data for US autos in June, and high auto inventories, trigger profit-taking, Sternby said.
By Friday, three-month copper prices stood at $2,653.5 per ton on the London Metal Exchange from $2,657 a week earlier. Three-month aluminum prices dipped to $1,710.50 per ton from $1,723.50.
Three-month nickel prices increased to $14,920 per ton from $14,825. Three-month lead prices rose to $840 per ton from $830. Three-month tin prices traded at $8,725 per ton from $8,580. Three-month zinc prices fell to $983 per ton from 989.
Oil: Oil prices shot higher as traders fretted over an unexpected fall in US crude inventories, signs OPEC may be wavering on a promise to boost output and a crisis at a major Russian energy producer.
Prices had tumbled in the early part of the week after the end of a strike in Norway and signs of rising supplies from OPEC producers. But markets went into reverse in the wake of a surprise drop in US commercial crude oil inventories.
The US Department of Energy said crude oil stocks fell 500,000 barrels to 304.9 million in the week to June 25, while the private American Petroleum Institute said they dropped 4.2 million barrels to 304.6 million Traders also took fright at a warning from Russian oil giant Yukos that it might be forced to halt production after being slapped with a new multi-billion-dollar tax bill.
By Friday, the price of benchmark Brent North Sea crude oil for August delivery stood at $36.20 per barrel in late London trading against $34.96 a week earlier. In New York, the reference light sweet crude August contract rose to $38.70 a barrel on Friday from $37.33 a week earlier.
Rubber: Rubber prices slid owing to rising supplies, traders said. “It is a shift in the equation: a little more supply coming on-stream and demand being routine,” said one London trader.
“A lot of factories in places like China are pretty quiet and production is picking up. As the weeks go by, production should continue to improve and prices should come down,” added the trader, who wished to remain anonymous.
Cocoa: Cocoa prices drifted lower in the absence of any fundamental news, though traders kept a close watch on unrest in leading producer Ivory Coast.
“Persistent political unrest in the Ivory Coast is undergirding prices and as the market enters a seasonal period of diminishing output as demand begins to pick up, there are those who argue that a rally is justified,” said Refco analyst Ann Prendergast said.
Coffee: Coffee prices softened in the absence of frosts in leading producer Brazil. “Mild weather in the Brazil coffee-growing region is projected to continue for at least the next week, probably two,” said Prendergast. On LIFFE, Robusta quality for September delivery fell to $774 per ton on Friday, from $779 a week earlier. On New York’s CSCE market, Arabica for September delivery slipped to 74.50 cents per pound from 75.75 cents.
