20000109

Commodity prices

slip as Y2K

bug fails to bite

LONDON: Commodity prices had a rocky start to the year after the Y2K computer but failed to bite, leading dealers to offload contacts that they had stockpiled late last year in expectation of supply hiccups.

A slide on stock markets around the world exacerbated the decline.

Oil prices suffered from the absence of major computer problems. They were hit further by mild weather in the United States, which reduced demand for heating oil, and by market concern that some Opec countries may begin to exceed self-imposed production cuts.

Brent North Sea crude prices fell by more than 1.5 dollars to 23.75 dollars a barrel.

Gold also fell victim to the failure of the Y2K bug to disrupt systems.

GOLD: Gold prices on the London Bullion Market fell sharply after dealers off-loaded precious metal that they had bought in case of monetary meltdown sparked by the Y2K computer bug.

The spot price on the London market fell by nine dollars to 282 dollars an ounce.

Prices had soared prior to the year-end festivities as traders stockpiled precious metals contracts.

"Given that the rally seemed to have little substance and was blamed on hedging in case a Y2K disaster prompted a move away from cash, the retracement is no surprise," GNI brokerage said in a research note.

An announcement that the Dutch Central Bank sold three tonnes of gold last week had little impact on the market.

The bank said, in December that it planned to sell 300 tonnes of gold in the coming five years, of which 100 tonnes would be sold this year.

SILVER: Silver prices fell amid market rumours that China is about to sell some of its surplus metal.

The spot price on the London Bullion Market fell to 5.14 dollars an ounce from 5.33 dollars.

PLATINUM and PALLADIUM: The price of these two metals fell sharply after the acting Russian President Vladimir Putin ordered the lifting of a freeze on Russian platinum exports.

The order permits state-controlled export firms led by Almzyuvelir Export to begin selling refined platinum and other base metals on world markets after they were halted last year.

Dealers predicted that shipments of metal from Russia, which is the world's second-largest platinum producer after South Africa, would begin appearing on the market quickly.

Russia's platinum exports had been paralysed since last spring due to a legal technicality in a December 1998 law.

Platinum prices on the London market fell by 29 dollars to 431 dollars an ounce.

Palladium prices fell by 11 dollars to 433 dollars an ounce.

BASE METALS: The majority of base metals lost ground this week on the London market after their giddy ascent late last year, following in the wake of world stock markets that were pulled down by fears of higher interest rates.

Analysts remain reasonably optimistic however about long-term prices this year, due to a healthy outlook for world economic growth.

The brokerage Rodolf Wolff said that aluminium has the brightest prospect, followed by nickel copper and zinc.

On the London Metal Exchange, three-month nickel prices lost 215 dollars to 8,285 dollars per tonne.

Copper prices fell back 10.5 dollars to 1,860.5 dollars per tonne. Aluminium prices gained 10 dollars a tonne to 1,660 dollars. Zinc fell back 23 dollars to 1,222 dollars. Lead prices gained 3.5 dollars to 499 dollars a tonne. Tin remained unchanged at 5,760 dollars per tonne.

OIL: Oil prices fell back further this week amid technical factors related to the failure of the millennium bug to bite and continued fears over the discipline of the Organisation of Petroleum Exporting Countries (Opec) to maintain an output squeeze.

Brent North Sea crude oil was being traded at 23.75 dollars a barrel for February delivery on the International Petroleum Exchange, from 25.16 dollars one week earlier.

On the New York Mercantile Exchange (Nymex), light sweet crude for January delivery fell to 24.78 dollars from 26.47 dollars a barrel last week.

Analysts said the fact that the millennium bug caused no disruption to the oil market meant that supply would not be interrupted while demand would drop on the part of those market players who covered short positions ahead of the year-end.

In the United States for example, 17 million barrels of crude stocked as precaution against a millennium bug mishap would find their way back to the market in January, sapping at primary demand, the GNI brokerage said.

All eyes meanwhile are turning to Opec as its 12-month output squeeze nears an end. One recent report by the Petroleum Finance Corp said the 11-nation group had just 70 percent compliance with production quotas in December from 77 percent in November.

The Centre for Global Energy Studies meanwhile said that Opec now faced a tough decision of how to unwind the output cuts of 1.7 million barrels of oil a day without prompting a fresh slump in prices.

In its Global Oil Report, the centre said high oil prices were starting to have a negative impact on oil demand and could harm Opec's long-term prospects.

RUBBER: Rubber prices fell back this week amid unchanged fundamentals as poor weather continued to hammer producer regions in southeast Asia while demand remained stable.

The London rubber index stood at 420 pounds per tonne for February delivery and 465 pounds for March.

In Kuala Lumpur, the RSS1 index stood at 2.43 ringgit per kilo.

The SMR20 index of rubber used in tyre products stood at 2.63 ringgit per kilo.

COCOA: Cocoa prices rose slightly higher this week amid renewed market worries over the political situation in Cote d'Ivoire, the world's leading producer country.

On the London market, May contracts rose to 584 pounds a tonne from 571 pounds

Dealers feared that supplies from the west African nation may be interrupted after the military coup there in late December.

Those fears were countered by the plentiful west African harvest. Cote d'Ivoire expects to reap a record harvest of 1.4 million tonnes of cocoa beans this year. The country produces about half of the world's cocoa exports.

COFFEE: Coffee prices continued to decline in the wake of a prior forecast from Brazil, which expects to produce a bumper crop this year.

In London, Robusta for March delivery fell by 16 dollars to 1,219 dollar per tonne.

In New York, Arabica for May delivery fell to 119.55 cents per pound from 128.40 cents.

Brazil in late December revised upwards its forecast for the forthcoming coffee harvest. The country is the biggest exporter of Arabica beans in the world.

TEA: High-grade tea continued to gain from strong demand, the London Tea Brokers Association said.

Top quality BP1 (Broken Pekoe) leaves rose by up to 13 cents, while lower grade leaves fell by up to 10 cents.

PF1 (Pekoe Fannings) leaves rose by up to 15 cents.

SUGAR: Sugar prices slipped in the face of plentiful supply around the world.

Analysts eyed a surplus of supply over demand and said that only widespread buying from Russia could soak up this excess.

In London, May contracts fell to 177.4 dollars a tonne from 179.8 dollars.

In New York, a pound of white sugar for March delivery fell to 5.77 cents from 6.12 cents.

VEGETABLE OILS: US soya prices rose on strong demand on the international markets.

Soya for January delivery on the Chicago Board of Trade (CBoT) rose by seven cents to 4.68 dollars.

GRAINS: US wheat prices had a mixed week, fluctuating as meteorological forecasts for South American producer regions predicted changeable weather.

In Chicago, a bushel of wheat was unchanged over the week at 248.50 cents a bushel (of 27.2 kg, for March delivery).

Maize prices fell slightly to 203.75 cents a bushel (of 25.4 kg, for March delivery) from 204.50 cents.

In London, wheat prices rose to 71.85 pounds a tonne (for January) from 70.75 last week.

COTTON: US cotton prices advanced this week in thin trading. March contracts in New York rose to 52.08 cents a pound from 49.60 cents.

Cash prices covered by the Cotton Outlook index rose to 44.35 cents a pound from 44.00 cents.

WOOL: There were no wool auctions in either Britain or Australia this week as the market enjoyed a last week of holidays.

The Wooltops index remained unchanged at 270 pence per kilo.ÑAFP