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London commodities

Volatile oil prices remain strong

LONDON: Volatile oil prices remained strong as dealers continued to bet for and against a sizeable increase in output after the Organisation of Petroleum Exporting Countries (OPEC) meeting in Vienna on March 27.

A flurry of conflicting messages emanated from producer nations this week, with a caucus including Iraq, Libya and Algeria reported to be opposed to bowing to US pressure to increase output.

The kingpin producer, Saudi Arabia, meanwhile agreed with a former opponent to the US viewpoint, Iran, on the need to increase production.

Even if most analysts expect the world's leading producers to raise output after the Opec meeting in Vienna on March 27, they were eagerly awaiting news on the timing and extent of any increase.

The markets were extremely volatile as dealers placed their bets, but prices remained close to nine-year high points.

Elsewhere, nickel prices rose to their highest level for five years amid continued strong demand, while other base metals fell on fears of disruption to global economic growth.

GOLD: Gold prices rose slightly in the slipstream of oil and warnings over current share price levels on Wall Street.

The yellow metal enjoyed an upturn in demand after warnings from Federal Reserve Chairman Alan Greenspan and from stock market chiefs about the current strength of equity prices.

Gold has won back its role as a safe-haven asset at times of inflationary pressures. The surging oil price has come as the latest risk to increased inflation in the industrialised world.

The metal also gained from stronger palladium prices. The price rise has been capped by weakness of the Australian dollar, which has led Australian producers to market so that they may gain from the strong US dollar returns from their sales.

The spot price on the London Bullion market rose to 290.30 dollars an ounce from 289.30 dollars.

SILVER: Silver prices remained under pressure amid nervous trading as dealers awaited the annual report from the powerful US investor Warren Buffet, who prompted a dramatic price rise in 1998 by buying up visit amounts of metal.

Analysts predicted that the results would confirm that Buffet's Berkshire Hathaway fund had sold the bulk of 130 million ounces of silver it had bought.

Cash prices on the London Bullion Market rose by a modest seven cents to 5.10 dollars an ounce.

PLATINUM and PALLADIUM: Dealers were keenly awaiting confirmation that the acting Russian President Vladimir Putin had signed a decree authorising renewed exports of palladium from the world's leading producer country.

Trading was extremely cautious ahead of the announcement as analysts predicted that future export levels would fall short of market demand.

As a result, palladium prices continued to rise. Palladium rose by 22.5 dollars to 692.5 dollars a tonne. Platinum prices, in contrast, fell by 19 dollars to 482 dollars an ounce.

BASE METALS: Nickel prices continued to soar to new heights this week, while other metals lost a little ground. Nickel prices continued to gain from strong demand for stainless steel, the main outlet for the metal, and from industrial unrest at a number of production sites.

A fall in market reserves helped prices further. In general, however, trading on the London Metal Exchange (LME) was erratic.

Dealers were made to feel nervous by the strength of crude oil prices, which raised the spectre of inflation around the world, and jitters on Wall Street as dealers feared a pronounced downturn on the world's leading equity market.

Rudolf Wolff trading house said that base metal prices were likely to rise in the coming weeks so long as strong oil prices did not derail the global economy.

It identified zinc and aluminium as the most likely risers. Three-month nickel prices rose by 350 dollars to 10,355 dollars a tonne. LME reserves fell by 1,176 tonnes to 33,750 tonnes.

Copper held firm at 1,760 dollars a tonne.

Aluminium, meanwhile, lost seven dollars to 1,600.5 dollars a tonne in spite of a fall of 26,000 tonnes in LME reserves to 832,400 tonnes.

Zinc gained 17 dollars to 1,148 dollars a tonne after LME stocks fell by 3,400 tonnes to 277,175 tonnes. Lead lost six dollars to 457.5 dollars a tonne. Tin fell by 127 dollars a tonne to 5,552 dollars.

OIL: Volatile oil prices closed unchanged after a tumultuous week as markets continued to assess prospects for a sizeable production increase next month.

The price of Brent North Sea crude for April delivery, which rose above 31 dollars to its highest level for more than nine years midweek, was trading at 28.95 dollars late Friday on the International Petroleum Exchange, unchanged from the previous week.

In New York, the price of benchmark light sweet crude for April delivery was also unchanged at 31.69 dollars per barrel, having soared earlier in the week.

After early gains, prices crashed by almost three dollars on Wednesday. "There is a lot of volatility on the market," said Irene Himona, an oil analyst at ABN Amro Hoare Govett brokerage.

Dealers continued to assess what action producing countries would take after the Opec meeting.

The latest comments from Opec members suggested that a production increase was on the agenda.

The Saudi Crown Prince Abdullah bin Abdel Aziz said he was convinced that Opec would agree to raise production later this month. But analysts continued to ponder by how much and when output would be increased.

In Paris, the International Energy Agency warned that world oil demand growth would outstrip supply from non-Opec countries by around a million barrels a day this year.

The IEA monthly oil market report stopped short of directly urging OPEC to increase output to help meet the shortfall, but forecast demand for Opec oil at an average 28.5 million barrels a day this year, two million more than Opec's February output.

Elsewhere, workers in Nigeria's crude oil and fuel distribution sectors called off a four-day strike.

Producer nations pressed on with a flurry of behind-the-scenes discussions aimed at forging a consensus on future output levels.

Iran's oil minister, Bijan Namdar Zangheneh, will hold talks in Muscat on Saturday and Abu Dhabi on Sunday, officials said. He met his Saudi counterpart Ali al-Nuaimi for a rare meeting in Riyadh on Wednesday to coordinate positions.

Prices plunged on Wednesday on news that Saudi Arabia had reached agreement with Iran, which along with Iraq, Algeria and Libya had argued against an increase in output.

The current output regime, drafted about a year ago, expires on March 31. Opec slashed output by 1.7 million bpd in April 1999 as part of global production reductions of 2.1 million bpd, sparking a recovery in prices that had slumped to below 10 dollars a barrel in late 1998.

RUBBER: Rubber prices were flat amid plentiful supplies. The London rubber index gained seven cents to 507.5 pounds per tonne (for February delivery).

In Kuala Lumpur, the RSSI index fell to 2.70 ringgit per kilo from 2.78 ringgit.

COCOA: Cocoa prices rose to their highest level for six months after African producers agreed to coordinate exports in a drive to reduce supplies on the market.

Cocoa for May delivery rose to 635 pounds a tonne from 620 pounds. Speculators bought into the latest price rise, making the movement all the more telling.

COFFEE: London coffee prices remained stable, while the New York market built on recent gains that followed predictions of a smaller-than-expected harvest in Brazil.

The US agriculture department predicted that the Brazilian harvest would be 28.1 million sacks this year, compared with Brazilian forecasts of a 28.9-million-sack crop.

Robusta (for May delivery) on the London market closed at 1,013 dollars a tonne from 1,014 dollars.

In New York, Arabica (for May) rose to 107.70 cents a pound from 105.85 cents.

TEA: BP1 (Broken Pekoe) leaves gained up to nine cents, while PDust lots lost up to 50 cents in the Kenyan auction houses.

SUGAR: Sugar prices rose on technical and speculative purchases this week in spite of the backdrop of a global supply surplus. August contracts on the London market rose to 174.8 dollars a tonne from 171.7 dollars.

In New York, may contracts rose to 5.16 cents a pound from 4.96 cents.

VEGETABLE OILS: US soyaprices rose on healthy export figures, which increased by 16 percent in the week to March 2.

Dealers said that harvesting had been delayed in Brazilian plantations.

On the Chicago Board of Trade (CBoT), a bushel of soya for March delivery rose to 5.07 dollars from 5.01 dollars.

GRAINS: Grain prices rose on better-than-expected sales figures from the United States in spite of favourable weather conditions in US plantations that hit prices early in the week.

In Chicago, a bushel of wheat (27.2 kg), for March delivery) rose to 254.25 cents from 247.25 cents. Maize rose to 220.50 cents a bushel (of 25.4 kg, for March delivery) from 216.25 cents.

In London, a tonne of wheat rose to 70.30 pounds (for March delivery) from 69.65 pounds.

COTTON: Cotton prices rose on predictions of a surge in US sales. May contracts rose to 63.01 cents a pound from 60.68 cents. Cash prices covered by the Cotton Outlook index rose to 56.40 cents a pound from 56.10 cents.

WOOL: High-grade Australian wool rose amid predictions of a possible supply shortage this year if China moves back into the market. The Eastern index rose by 15 cents to 653 Australian cents per kilo. In Britain, the Wooltops index fell by 13 pence to 270 pence a kilo.ÑAFP