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Oil surges on hopes of prolonged production restraint

LONDON: Oil prices surged higher amid widespread predictions that the world's leading producer countries would extend output constraints beyond the current mandate which expires in February.

Brent North Sea crude rose back above the 25-dollar mark for the first time this year on the International Petroleum Exchange.

Key Opec countries were thought likely to extend cutbacks of 1.7 million barrels of oil per day that have been in force since March 1999.

There was a string of meetings between Opec oil ministers in Amsterdam and Vienna and all the signs were that the group would agree to extend the cutbacks that were put in place to help prices recover from the 10 dollars a barrel seen early last year.

The other commodities were fairly inactive this week.

GOLD: Gold prices moved in a tight range this week with few new fundamental factors, with only technical buying giving prices a lift ahead of a three-day weekend in the United States.

The spot price on the London market rose by 2.15 dollars to 284.15 dollars an ounce. Leading research group Gold Fields Mineral Services predicted that prices would average 280 dollars an ounce over the next six months, arguing that stronger jewellery demand and less producer hedging should mitigate the impact of central bank sales and speculative short selling.

It estimated that price volatility prompted producers to hedge a record 445 tonnes of output last year.

"Gold's upside will be constrained by the price elasticity of demand and a lack of investor buying interest," it said, adding that the impact of a September pact by European central banks to rein in sales for five years would have little short-term impact.

SILVER: Silver prices fell further this week as rumours persisted that China was about to sell part of its surplus of the precious metal.

The spot price on the London Bullion Market fell to 5.09 dollars an ounce from 5.14 dollars.

PLATINUM and PALLADIUM: The price of these metals rose this week albeit on thin volume.

Palladium prices fell briefly on reports that Russian exports were becoming more regular and sizeable, but strong demand ensured that prices finished the week in positive territory, up seven dollars to 440 dollars an ounce.

Platinum prices on the London market rose by nine dollars to 423 dollars an ounce.

BASE METALS: Base metals had a mixed week in calm trading, with nickel prices turning up after Canadian group Inco suspended plans for a new mine due to a disagreement with authorities in Newfoundland.

"The company will not be in a position to commence construction of a mining and milling operation at Viosey's Bay this year," Inco said. It said requirement by provincial authorities that it promise to construct a commercial processing facility, even if it were uneconomic, was the stumbling block to an accord.

The site, which Inco has been keen to exploit since 1995, had been expected to be the largest nickel mine in the world.

Three-month nickel prices, which had sagged to as low as 8,105 dollars a tonne on Monday, picked up through the week to 8,250 dollars by Friday. Copper prices also perked up, gaining 23.5 dollars to 1,884 dollars per tonne.

Aluminium prices were unchanged at 1,660 dollars. Zinc prices fell by 10 dollars to 1,212 dollars per tonne. Lead gave up 8.5 dollars to 490.5 dollars. Tin fell 155 dollars to 5,915 dollars a tonne.

OIL: Oil prices rose sharply this week as key Opec ministers met in Vienna amid growing signs that the organisation would extend a year-long agreement capping production.

North Sea Brent crude for February delivery rose to 25.20 dollars a barrel from 23.75 dollars last week.

On the New York Mercantile Exchange (NYMEX), light sweet crude for February delivery rose to 26.69 dollars a barrel from 24 dollars.

Prices gained from growing speculation that the market monitoring committee of the Organisation of Petroleum Exporting Countries (Opec) would recommend that oil production ceilings that have been in place since last March be extended beyond the current deadline of March 2000.

Market prices rose sharply on Thursday, when Saudi Oil Minister Ali al-Naimi, speaking after a meeting with Venezuelan Oil Minister Ali Rodriguez in Amsterdam, said it was not necessary for the moment to act to change conditions on the oil market.

This was echoed by ministers arriving in Vienna ahead of Friday's meeting of the MMC, which groups oil ministers from Iran, Kuwait and Nigeria, plus Opec secretary general Rilwanu Lukman.

"We don't need to do anything in March," Kuwait's Saud Nassar al-Sabah told reporters. "Beyond March we have to see. Maybe we need to go through the year 2000," he added.

Venezuela's Rodriguez told AFP that the accord might stay. "That is a possibility but not a decision. It is too early to say. We are now in January and the accord lasts until March. We are studying it with other members. We have to wait until March," he said.

The full ministerial meeting of Opec is not due until March 27. Oil prices recovered from historic low points last March, when producers agreed to rein in production by 2.1 million barrels per day, including a 1.7-million barrel reduction by Opec members.

Analysts predicted that prices would continue to fluctuate around the 25-dollar mark.

"We are not left in a self-stabilising situation," GNI brokerage said. "If oil prices move too low, the chances that the current accord will be extended increase. If prices increase, then the chances of higher production increase".

RUBBER: The rubber market showed little sign of activity this week. The liquidation of a leading British rubber trader, Lewis and Peat brokerage, had only a minimal impact on global prices.

The London rubber index rose to 455 pounds per tonne (for February delivery) from 420 pounds.

Meanwhile, in Kuala Lumpur, the RSS1 index fell to 2.39 ringgit per kilo from 2.43 ringgit.

COCOA: Cocoa prices advanced further this week as fears persisted on the situation in world number one producer Cote d'Ivoire.

On the London market, May contracts rose to 607 pounds a tonne from 584 pounds. Dealers are watching the situation in Cote d'Ivoire closely, despite apparent eagerness on the part of producers to catch up with shipments following the delays caused by the coup d'etat last year.

Cote d'Ivoire, which is anticipating a record harvest of 1.4 million tonnes of beans this year, accounts for almost 50 percent of global exports.

COFFEE: Robusta prices fell in London while Arabica picked up in New York, as the market continued to churn around with few new fundamental factors.

In London, Robusta for March delivery fell by 55 dollars to 1,164 dollars per tonne. In New York, Arabica for May delivery rose to 121.30 cents per pound from 119.55 cents.

Prices have been under pressure since he end of last year when Brazil said it was anticipating a larger coffee bean harvest than previously expected in the 2000/01 season.

TEA: Demand was slacker than usual in the Mombassa auction houses, and no more than average in Colombo, the London Tea Brokers Association said.

Top quality BP1 (Broken Pekoe) leaves lost up to 18 cents, while lower grade leaves fell by up to 15 cents.

Better-quality PF1 (Pekoe Fannings) leaves lost up to 28 cents. In Colombo, Broken Orange Pekoe leaves fell five per kilo.

SUGAR: Sugar prices continued to fall amid sustained fears of a global supply surplus.

A reduction in supplies from Brazil, China and Turkey would not be enough to prevent the build-up of stock piles of some 4.8 million tonnes of sugar this year, the International Sugar Organisation said.

May contracts on the London market fell to 174.3 dollars a tonne from 177.4 dollars last week.

In New York, a pound of white sugar for May delivery remained unchanged at 5.77 cents.

VEGETABLE OILS: US soya prices rose as dry weather continued to bear down on growing regions in Latin America and after a downward revision of US crop forecasts. The US agriculture department revised its US soya forecast down to 71.93 million tonnes for the 1999/2000 season. This would be well below the 74.60 million tonnes read in 1998/99.

On the Chicago Board of Trade (CBoT), a bushel of soya gained 13 cents to 4.81 dollars (for January delivery).

GRAINS: The US cereal prices gained from hot, dry weather in South American growing regions that was thought likely to continue into next week.

The market also received a fillip from lower-than-expected maize stock levels and from figures showing that US stocks and land area planted with wheat had fallen to lows not seen since 1972.

In Chicago, wheat prices rose to 263.50 cents form 248.50 cents a bushel (of 27.2 kg, for March delivery).

Maize price to 220.75 cents from 203.75 cents a bushel (of 25.4 kg, for March). In London, meanwhile, wheat prices fell to 70.50 pounds per tonne from 71.85 pounds.

US figures showed that wheat stocks had fallen to 51.14 million tonnes in December from 51.59 million tonnes one year earlier.

COTTON: Cotton prices continued to rise this week. In New York, May contracts rose to 55.95 cents a pound from 52.08 cents. Cash prices covered by the Cotton Outlook index rose to 44.55 cents a pound from 44.35 cents.

WOOL: Wool prices gained from strong demand at the first auctions of 2000 in the Australian auction houses. The Eastern index rose by 34 cents to 621 Australian cents per kilo. Demand was also strong in the Bradford auction houses in Britain, but the Woltops index remained unchanged at 270 pence per kilo.ÑAFP