OIL:
In recent days oil has fallen from a record high of $111.80 touched on March 17. Concerns about weaker demand in top oil consumer, the United States tempted some players to cash in. Oil has dropped more than $10 from earlier week’s record high. A slowdown in the US economy, combined with a seasonal fall in demand in the second quarterly, may drive oil prices below the $100 mark for the coming weeks.
After a US government report showed larger than expected drop in fuel stocks in the world’s top consumer, oil jumped $4 a barrel on March 26.
Gasoline inventories fell by 3.3 million barrels, the Energy Information Administration said, more than the 800,000-barrel decline expected. Distillates dropped 2.2 million barrels, also more than forecast.
Crude oil inventories also bucked expectations. Stocks were expected to rise by 1.7 million barrels last week, but were unchanged. Earlier on March 26 oil rose as a weakening dollar prompted some investors to shift money back into commodities and a 24- hour strike disrupted operations at French ports.
The dollar slid after data showed that new orders for long-lasting US-made manufactured goods unexpectedly fell 1.7 per cent during February, supporting oil and other commodities.
On March 27, oil prices jumped above $107 for concerns about tight supplies were compounded by news that saboteurs had blown up an Iraqi export pipeline.
New York’s main oil contract, light sweet crude for delivery in May, rose $1.05 to $106.95 per barrel, after earlier striking $107.70. London’s Brent North Sea crude for May climbed 61 cents to $104.60.
One of Iraq’s two main oil export pipelines near the southern city of Basra was blown up by saboteurs. The pipeline carries crude from the Zubair oil field to the Al-Faw storage facility from where it is exported. Lost production, however, in this case could total just 130,000 barrels of oil over the next few days as the pipeline is repaired.
Oil prices were also supported by a weaker-than-expected energy stockpiles report in the United States.
The US government said recently that crude inventories were unchanged at 311.8 million barrels in the week ending March 21. That contrasted sharply with market expectations for a weekly gain of 1.8 million barrels.
Gold:
Gold hit a one week high above $950 an ounce on March 26, as a falling dollar and strong oil prices encouraged investors to shift money back into the market, after earlier week’s heavy sell off.
A week earlier gold had tumbled more than 10 per cent since spiking to a record high of $1030.80 an ounce on March 17.
Platinum has fallen more than 20 per cent from this month’s record high of $2,290 before marginally recovering, silver has slipped 20 per cent from a 27-year high and palladium has plummeted nearly 30 per cent before ticking higher.
Gold hit a record of $1,030.80 on March 17 before a broad sell-off in commodities dragged down prices to a one-month low of $904.65, briefly hurting investors confidence in the metal, seen as an alternative investment and a hedge against inflation.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation. Analysts said gold could retest the highs in the near term.
Platinum rose 4.3 per cent to $1,960 a troy ounce. John Reade of UBS said the recent sell-off presented a buying opportunity after noting extremely strong European demand from high-end jewellery companies who bought unprecedented amounts of platinum during the recent pull-back.
The power problems in South Africa has affected platinum production.
Aluminium/Copper:
The power problems in South Africa will also have a significant impact on aluminium output: BHP Billiton is to close a significant portion of its aluminium smelting capacity in South Africa, losing about 120,000 tonnes a year of production.
Base metals staged a broad recovery with aluminium up 2.2 per cent to $2,905 a tonne while copper added 3 per cent at $8,075 a tonne.
Codelco Norte, the biggest division of Codelco, the world’s largest copper producer, expects output this year to fall by 6.3 per cent to 840,000 tonnes, due to lower ore grades. Codelco produced a total of 1.665 million tones of copper last year and its chief executive said prices for the red metal would remain high due to continued strong demand from China.
Lead added 1.5 per cent at $2,755 a tonne while zinc gained 2.6 per cent at $2,330 a tonne and nickel rose 3.5 per cent at $29,550 a tonne.
China’s nickel output is expected to rise 17 per cent to 250,000 tonnes this year, mainly as a response by key producers to strong demand from the stainless steel industry, according to Antaike, the state-run metals information provider.
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