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Uncertainty over production Prices may continue upward trend in short term

LONDON: Oil prices soared to fresh nine-year high points as uncertainty continued to swirl through the market over future production levels.

Leading producers gathered in London and agreed that output would rise in the coming year, but the key questions of by how much and when still remained unanswered.

Crude prices rose above 32 dollars a barrel in New York and above 30 dollars in London after the meeting of Saudi, Venezuelan and Mexican oil ministers. The US energy secretary was also in town to press the case for increased production.

The price rise was down to market concern at the apparent lack of consensus among OPEC countries as to just how output levels should be manipulated to cool the market down.

The key date for the oil market is March 27, when OPEC holds its ministerial conference in Vienna to renew the current output regime which expires in April.

The precious metals were dragged lower by palladium and platinum, as dealers braced for renewed supplies from Russia.

GOLD: Gold prices weakened under the weight of decline in the price of platinum, the strength of the US dollar and the prospect of further gold sales by central banks.

The spot price on the London Bullion Market fell to 289.30 dollars from 397.15 dollars an ounce the week before.

The precious metal has now lost the gains it made following a surge last month brought about after the second-biggest Canadian producer Placer Dome said it would suspend hedging activities for an unspecified period of time.

Hedging, which involves selling forward gold not produced yet, has long been used to protect the price of gold. However, detractors argue that, although it might prevent the worst falls, it pushes the price lower than might would otherwise have been.

Following Placer Dome's announcement, gold reached its highest levels since an announcement last September by 15 European central banks that they would not add to planned sales of gold and would contain the lending of gold during the next five years.

Prices were pulled lower this week after the Dutch central bank said it has sold almost all the 100 tonnes of gold it planned to sell this year, and the Bank of England confirmed plans to auction 150 tonnes of gold over the financial year 2000-2001, as part of its ongoing restructuring of Britain's reserve holdings.

Dealers also expect an imminent sale of gold by the Swiss central bank.

SILVER: The general weakening of precious metals dragged silver lower.

Cash prices on the London market fell to 5.03 dollars an ounce from 5.25 dollars.

PLATINUM and PALLADIUM: Palladium and platinum prices continued to fall after Interfax news agency reported that Acting President Vladimir Putin signed a decree allotting new export quotas for platinum and palladium for 2000.

Palladium ended the week at 670 dollars compared with 700 dollars at the end of last week. Earlier this month, palladium climbed to record highs of more than 800 dollars an ounce.

Platinum followed palladium downwards to 463 dollars compared with 475 dollars the week before.

Putin's decree means that Russia may resume exports of platinum, which were halted last year because of bureaucratic problems. Russia is the world's second-largest producer of platinum after South Africa.

Concerning palladium, only the metals giant Norilsk Nikel previously had permission to export the metal under a 10-year quota granted last year.

Gokhran, the state structure in charge of precious metals, and the central bank have been unable to obtain export quotas for palladium since the beginning of the year.

BASE METALS: Nickel and aluminium prices fell back, drawn lower by falls in copper whose price was lowered by an increase in supply.

However, analysts consider the outlook good for base metals because of strong world demand.

Nickel, which is still near five-year highs, 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.

Aluminium prices have been troubled by unconfirmed reports the European Commission may block the proposed three-way merger with Alcan Aluminum Ltd and Alusuisse Lonza Group AG.

The price of lead remained very low.

On the London Metal Exchange (LME) three-month nickel prices lost 35 dollars to 10,005 dollars per tonne. LME stocks fell to 34,926 tonnes from 36,048 tonnes.

Copper prices fell by 84 dollars to 1,760 dollars per tonne after a rise in LME reserves to 831,750 tonnes from 814,800 tonnes.

Aluminium fell by 52 dollars to 1,607 dollars per tonne. Three-month zinc fell by 13 dollars to 1,131 dollars per tonne. Lead lost 3.5 dollars to 463.5 dollars per tonne. Tin fell by 60 dollars to 5,680 dollars per tonne.

OIL: Oil prices climbed to nine-year highs following a meeting of the Saudi Arabian, Venezuelan and Mexican oil ministers which established the need for increased supplies, but failed to produce agreement on how and when.

On the London market, the price of benchmark Brent North Sea crude for April delivery on Friday was trading at 29.13 dollars a barrel compared with 27.25 dollars a week earlier.

In New York on Thursday the price of light sweet crude for April delivery closed at 31.69 dollars, after rising to slightly more than 32 dollars earlier in the day. Last Thursday it was trading at 29.97 dollars a barrel.

Analysts said that in view of the continued uncertainty, they believe prices will remain high in the short term, although, in the longer term, they are considered unsustainable.

The market had high hopes for Thursday's London meeting of Saudi Arabian Oil Minister Ali al-Nuaimi and his Venezuelan and Mexican counterparts Ali Rodriguez and Luis Tellez.

The Saudi and Venezuelan ministers and a Mexican official were last year instrumental in drawing up the reduced oil supply regime which expires on March 31.

An official decision on whether to increase supplies and help bring down inflated oil prices is expected from the conference of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna on March 27.

Speaking after Thursday's meeting, Saudi Arabian Oil Minister Ali al-Nuaimi said: "We recognise that there is a need for additional production."

However, he stressed that the two questions which have troubled oil markets for weeks remained unanswered, saying: "The issue is when and how much."

The three ministers met two days after talks between Rodriguez and US Energy Secretary Bill Richardson. Richardson, who has been lobbying intensively for increased production to bring prices down, reiterated his belief that OPEC will increase quotas.

RUBBER: Rubber prices fell back sharply this week as supply increased and demand stagnated. The International Natural Rubber Organisation Ñ which announced its demise at the end of 1999 Ñ refused bidders for its stocks on the ground the prices being offered were too low.

The London rubber index sank to 500 pounds a tonne, compared with 527 pounds last week, while in Kuala Lumpur, the RSS1 index was at 2.78 ringgit per kilo, compared with 2.93 ringgits last week.

COCOA: Cocoa prices continued to rise on speculative and technical purchases in spite of predictions of a record harvest in the world's leading producer country, Cote d' Ivoire.

May contracts on the London market rose by 40 pounds to 620 pounds a tonne. Dealers forecast a crop of up to 1.3 million tonnes in Cote d'Ivoire.

COFFEE: Coffee prices picked up from the seven-year lows seen last week on predictions of a smaller-than-expected crop in some regions of Brazil and Colombia.

Robusta contracts in London rose to 1,014 dollars per tonne for May delivery from 993 dollars.

In New York, Arabica (for May) rose to 105.85 cents a pound from 103.15 cents.

Prices gained from predictions that the central Brazilian state of Minas Gerais would see its crop fall by five percent.

Predictions of poor weather in Colombia also lifted prices. Dealers said that heavy rainfall unleashed by La Nina weather systems might damage plantations there.

The market has been struggling under high stock levels in recent months.

TEA: Tea prices fell on weak demand in the Kenyan auction houses.

Top quality BP1 (Broken Pekoe) leaves lost up to 21 cents.

SUGAR: Sugar prices fell under the weight of hefty stock levels. In London, August contracts fell to 171.7 dollars a tonne from 172.4 dollars.

In New York, white sugar for May delivery fell to 4.96 cents a pound from 5.12 cents.

Stock levels have risen sharply under high export volumes from Thailand, Cuba and Central America.

Russian officials said that the country was likely to import 3.5 to four million tonnes this year, compared with a record 5.78 million tonnes in 1999.

VEGETABLE OILS: US Soya prices fell slightly as rainfall returned to plantations in Latin America.

A bushel of soya on the Chicago Board of Trade (CBoT) fell by three cents to 5.01 dollars (for March delivery).

GRAINS: International grain prices moved in opposite directions this week, with US wheat prices hit by much-needed rainfall on winter wheat plantations in Kansas, Oklahoma and Texas, while the London market firmed.

On the Chicago market, a bushel of wheat (27.2 kg, for March delivery) was trading at 247.25 cents from 254.75 cents.

Maize remained unchanged at 216.25 cents a bushel (of 25.4 kg, for March.

In London, March contracts rose to 69.65 pounds from 69.55 pounds.

COTTON: US cotton prices continued to rise. May contracts in New York rose to 60.68 cents a pound from 60.33 cents. Cash prices covered by the Cotton Outlook index rose to 56.10 cents a pound from 54.70 cents.

WOOL: Wool prices took another hit from the weakness of the Australian dollar. The Eastern index lost one cent to 638 Australian cents per kilo. The Wooltops index held at 283 pence a kilo. AFP