20000227

Oil firm, palladium slips from its summit

LONDON: Oil remained close to the nine-year highs seen in recent weeks as dealers continued to assess likely decisions on output from the world's leading producers, while palladium toppled off its perch as prices were frozen in Japan.

The oil market was nearly convinced that producers would increase out put once the current export regime expires on March 31, but the burning question was by how much and just when production would be altered.

Palladium fell back from its historic highs even though there was little news from Russia as to when the central bank would authorise fresh exports. The decline pulled other precious metal prices lower.

GOLD: Gold fell under the weight of palladium, the weakness of the Australian dollar, the sale of seven tonnes of metal by the Dutch central bank and resolution of the crisis at Ashanti, a Ghanaian mining company which faced potentially crippling cash-flow problems.

The spot price on the London Bullion Market fell to 297.15 dollars from 301.50 dollars an ounce.

On Tuesday, Ashanti Goldfields said it had clinched financing deals worth 370 million dollars and negotiated margin-free trading for three years, following an amendment of its agreement with its 14 hedge counterparties.

Hedging, which involves selling forward gold not yet produced, has long been used, notably by mining companies, as a way of reducing risk.

Analysts said that, prior to the agreement, the market had anticipated hedge counterparties could be forced to enter the market and buy gold which could have driven up the price. However, it is now clear that any changing of position has already taken place.

SILVER: Silver prices followed gold lower in a calm market. Cash prices on the London market fell to 5.25 dollars on ounce from 5.28 dollars.

PLATINUM and PALLADIUM: Palladium and platinum prices fell back this week after the Tokyo market effectively froze palladium prices in an attempt to control a runaway market.

However, underlying factors continue to point towards inflated prices, with no hard news on when Russia, the world's largest supplier, will cease to block export.

Palladium ended the week at 700 dollars compared with 735 dollars last week, after climbing to record highs of more than 800 dollars an ounce earlier in the week.

Platinum followed palladium downwards to 475 dollars compared with 573 dollars the week before.

Previous palladium price rises were fuelled by a shortage of the metal as Russia, which supplies 70 percent of the world's palladium, blocked its exports, but the market was also driven higher by a squeeze on the futures market based on Tocom.

Most analysts said they expected Tocom's action effectively to freeze prices to end what they considered to be artificially high prices.

There has been no concrete further news on when the Russian Central Bank will unblock supplies from Russia.

BASE METALS: Nickel prices soared above 10,000 dollars to the highest level for more than five years amid strong demand, while most other base metals fell back.

Nickel has gained from a fall in London Metal Exchange (LME) reserves in recent weeks as well as from strong demand for stainless steel, the major use for the metal, and production problems in Australia.

Prices rose in spite of an end to industrial unrest at Societe Le Nickel, a subsidiary of the French mining group Eramet, which had hampered production in New Caledonia.

Aluminium prices gained from strike action at a foundry owned by Pechiney group in France.

Three-month nickel prices rose by 70 dollars to 10,060 dollars per tonne. LME stocks fell to 36,048 tonnes from 37,908 tonnes. Copper prices fell by 11 dollars to 1,844 dollars per tonne after a rise in LME reserves to 814,800 tonnes from 794,975 tonnes.

Aluminium rose by 12 dollars to 1,659 dollars per tonne. Three-month zinc fell by seven dollars to 1,118 dollars per tonne. Lead lost three dollars to 467 dollars per tonne. Tin fell by 50 dollars to 5,620 dollars per tonne.

OIL: Oil prices continued to rise as the markets pondered future output levels from the world's leading producer countries, with most analysts predicting a rise in production.

The burning questions were when and by how much output would rise. The price of benchmark Brent North Sea crude for April delivery rose to 27.25 dollars a barrel from 26.49 dollars.

In New York, light sweet crude for March delivery rose to 29.97 dollars from 29.46 dollars. As such, prices remain close to the nine-year highs seen in recent weeks, even though most market watchers expect producers to raise output quotas in April.

US Energy Secretary Bill Richardson began a tour of Arab oil producers, seeking reassurances that future production levels will not promote higher prices.

Richardson issued a joint statement with his Kuwaiti counterpart Sheikh Saud Nasser al-Sabah saying that they agreed oil market stability was a common goal. However, they made no mention of a possible output hike to lower prices. The two ministers said in a joint statement, "price volatility in the oil markets is detrimental to both producing and consuming nations."

However, Kuwait said that extending the oil cuts responsible for driving prices up to nine-year highs was an OPEC decision, and that it remained committed to the cuts until the cartel's next meeting on March 27.

RUBBER: Rubber prices remained unchanged as more favourable weather returned to Asian plantations and as dealers braced for the imminent sale of stocks held by the International Natural Rubber Organisation.

The London rubber index was flat at 527 pounds per tonne and in Kuala Lumpur, the RSSI index was unchanged at 2.93 ringgit per kilo.

COCOA: Cocoa prices posted modest gains amid reports that Cote d'Ivoire, the world's leading producer, has sent a higher volume of beans to ports for export than had been forecast. May contracts on the London market rose by five pounds to 580 pounds a tonne.

COFFEE: Coffee prices crashed to 6-1/2 year lows as the market braced for a hefty surplus of Robusta beans after bumper production from the world's leading producer country, Vietnam.

Robusta for May delivery in London fell to 993 dollars per tonne from 1,079 dollars. Not since July 1993 have prices fallen below 1,000 dollars.

In New York, Arabica for May delivery fell to 103.15 cents a pound from 108.05 cents. Dealers said that the market was bracing for a surplus of up to six million 60 kg sacks of Robusta this season.

The predictions come amid expectations of a record harvest in Vietnam of up to 500,000 tonnes.

The country has revised upwards its export figures for January to 98,000 tonnes from an earlier estimated of 50,000 tonnes.

Analysts said that while Brazil's Arabica harvest had been afflicted by drought than flooding early this year, its Robust plantations had been spared major damage.

The current weakness of prices has prompted comments from the Association of Coffee Producing Countries, which groups the 14 leading coffee producing nations, that it is studying ways to respond to market conditions.

The association is studying proposals to reduce supply on world markets.

TEA: Tea prices showed no clear direction amid relatively low demand.

In the Kenyan auction houses, some lots of high-grade Broken Pekoe leaves rose by upto 16 cents, while other consignments fell by 12 cents.

SUGAR: International sugar prices were stable in the absence of fundamental news.

In London, August contracts slipped to 172.4 dollars a tonne compared with 172.6 dollars at the end of last week.

In New York, March contracts were trading at 5.12 cents a pound compared with 5.07 cents.

VEGETABLE OILS: US soya prices fell slightly as a result of heavy rain in production regions.

The market was also depressed by Brazilian government forecasts of increased production this year. Brazil is the world's second largest soya oil producer after the United States.

A bushel of soya on the Chicago Board of Trade (CBoT) fell by four cents to 5.04 dollars (for March delivery).

GRAINS: Grain prices fell again as a result of insufficient demand and heavy rain in the US production areas.

On the Chicago market, a bushel of wheat (27.2 kg, for March delivery) was selling for 254.75 cents compared with 262.50 cents last week.

A bushel of ize (25.4 kg for March) was selling for 216.25 cents, compared with 221.25 cents last week.

In London, a tonne of wheat fell to 69.95 pounds (for March) from 68.90 pounds.

The International Grains Council revised upwards its forecast for the world grain harvest to 1,462 million tonnes for the year 1999/2000, from the 1,460 million tonnes forecast in January.

At the same time, the council anticipated consumption will rise to 1,471 million tonnes from 1,470 million tonnes.

For the year 1998/1999, production estimates remained at 1,481 million tonnes, while consumption was revised to 1,469 million tonnes (from 1.470).

COTTON: In New York cotton prices rose to 60.33 cents a pound from 57.93 cents a pound last week.

Cash prices covered by the Cotton Outlook index rose to 54.70 cents from 54.10 cents a pound.

WOOL: Prices slipped back slightly this week in Australia, in spite of the appeal of very fine merino wool. The Eastern index shed three cents to 639 Australian cents per kilo. The Wooltops index was unchanged at 283 pence per kilo.