Oil
In the London market, oil prices had slumped close to $101 a barrel on September 9, their lowest since the start of April. Brent North Sea crude for delivery in October had dropped as low as $101.27 a barrel, while New York’s main contract, light sweet crude for October, shed $2.16 to 104.18 a barrel.
The drop came as the dollar surged to its highest level against the euro since October 2007 at $1.4095 and in spite of concerns that Hurricane Ike, heading to the oil-rich Gulf of Mexico would disrupt production.
Traders said any hurricane-related price gain could be short-lived amid worries that the economic slowdown was damping oil demand growth.
After an Opec meeting in Vienna, producers agreed to cut production by 520,000 barrels per day. Opec has ample room for manoeuvre to reduce output without announcing an official cut because current production is well above its agreed quota. According to the International Energy Agency, Opec members subject to quotas pumped in August about 30.4 million barrels a day, well above the 29.7 million barrel per day quota. The decision led oil prices to rebound. Opec announced a new output quota of 28.8 million barrel per day. This is a continuation of the previous quota.
Oil prices rose the following day in response to a decision by Opec to cut production. While London Brent crude was up by 28 cents at $100.62, US crude was up nine cents at $103.35 a barrel.
Since the market is over-supplied, Opec agreed to abide by September 2007 production allocations (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq), totaling 28.8 million bpd.
The market drew additional support from reports of an earthquake that struck southern Iraq near Bandar Abbas, site of a major Iranian oil refinery.
Oil has fallen about 30 per cent from a peak of $147.27 a barrel on July 11, partly due to a fall in demand, a stronger dollar and shifts in investment flows.
IEA price gains were limited as the International Energy Agency lowered its 2008 world oil demand growth forecast by 100,000 bpd due to the impact of weaker economic conditions and high prices.
The IEA, adviser to 27 industrialised countries on energy policy, also trimmed its forecast for 2009 global demand growth by 40,000 bpd to 890,000 bpd.
Sugar
Sugar output in Brazil, the world’s biggest producer, will be slightly less than earlier forecast, after rains slowed harvesting and mills turned more cane into ethanol.
Brazilian mills will produce 32.8 million metric tones of sugar this year, up from 31.3 million tones last year, the Agriculture Ministry’s Conab crop-forecasting agency said on September 7 in a statement. Conab in April forecast sugar output of 33.9 million to 35.2 million tones.
Above-average rainfall, which pared sugar-cane yields, forced growers to slow harvesting, while mills turned more of the tropical plant into ethanol to power cars in Brazil and the US. The slowing output, along with declining acreage in India, will help push up sugar prices 26 per cent by year-end.
Brazilian mills will turn 57 per cent of their sugar cane into fuel this year, up from 54 per cent last year. Ethanol output will rise to 27.1 billion litres (7.1 billion gallons) from 23 billion litres last year.
Ethanol use in Brazil, the world’s biggest exporter of the bio-fuel, will rise 32 per cent in the next three years as the number of flexible-fuel cars climbs. Consumption in Brazil will rise to 24.8 billion litres by 2011, up from 18.8 billion this year, the agency said.
Sugar futures for October delivery rose 0.14 cents, or 1.1 per cent, to 12.65 cents a pound on ICE Futures US, the former New York Board of Trade. The price will climb to 16 cents a pound by year-end.
This year, mills will process a record 558.7 million tones of cane into sugar and fuel this year, up 11 per cent from 501.5 million tones last year.
Total output, including cane used for alcoholic beverages and animal feed, will rise to 710.3 million tones, compared with 559.4 million tones last year.
Sugar cane planting for the current season rose to 9 million hectares (22 million acres) from 7.1 million hectares last year.
Gold
Gold prices eased, as crude prices gave up their gains after US oil inventory data, and as the dollar rose to a fresh 11 month high against the euro. Oil had been supporting gold after it rallied more than $1 a barrel on September 10 after oil cartel Opec unexpectedly said it would cut its output by 500,000 barrels a day.
Firmer crude prices typically benefit gold, which is often bought as a hedge against oil-led inflation.
Investor demand remains sluggish, however, as the dollar takes on a firmer tone. The world’s largest gold-backed exchange traded fund, the SPDR Gold Trust, said its bullion holdings dipped more than 10 tonnes, or 1.67 per cent, on September 9.
The trust now holds 631.2 tonnes of gold, down from 641.93 tonnes on September 8. The trust has sold some 68.7 tonnes of gold since its holdings hit a record 705.9 tonnes in July.
Among other previous metals, platinum and palladium both slipped sharply as investors worried about the outlook for demand from carmakers, who are major consumers of both platinum group metals. China said its passenger car sales fell 6.24 per cent year-on-year in August. Platinum fell to an 18-month low of $1,189.50, down more than three per cent on the day, while palladium slid more than five per cent to $219.50, its lowest since November 2005.
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