Oil which had been on the retreat for much of the second week of July, reversed course on July 10 as fears of supply disruptions from potential hot spots, Opec members Iran and Nigeria, resurfaced. A spate of missile tests by Iran, the world’s fourth-largest oil exporter, in the last two days against a backdrop of rising tensions with Israel and the United States has left the oil markets worried.

Rebel attacks on oil infrastructure in Nigeria, the world’s eighth-biggest exporter, have also been partly responsible for the nearly 50 per cent rise in prices this year.

Investors have also flocked to oil and other commodities this year as a hedge against rising inflation and a weak dollar.

Workers at Brazil’s Petrobras threatened to launch a five-day strike next week that would affect all 42 Campos basin offshore platforms, which account for more than 80 per cent of daily oil output of around 1.8 million barrels.

Oil has continued rising despite efforts by top exporter Saudi Arabia to raise production to its highest rate in three decades in an effort to tame oil prices.

On July 17, in the New York market, oil dropped by $5 extending a decline of about 12 per cent from preceding week’s record on worries over US demand and easing political tensions between Iran and the West over the Opec producer’s nuclear programme.

Oil’s slide marks the biggest three-day loss in the market in percentage terms since December 2004, and the biggest three-day loss in dollar terms since oil futures started trading in New York in 1983.

The sell-off has been a boon to world stock markets that have recovered some ground after getting hard-hit in recent months by mounting fears over inflation and the health of the banking sector.

US crude settled down $5.31 at $129.29 a barrel, the lowest since early June, adding to more than $10 of losses over the previous two days that have brought prices further down from July 11, all-time peak of $147.27 a barrel. London Brent crude fell $4.74 to settle at $131.07 a barrel.

Despite the losses, oil prices remain up nearly 30 per cent so far this year, and more than six-fold since 2002, driven by surging demand from developing economies in Asia and worries that world production growth won’t be able to keep pace.

Aluminium:

In the week ended July 12-13, aluminium prices hit a record $3375, after China the world’s biggest producer, ordered smelters to reduce production because of increasingly serious power supply problems across the country.

China’s top 20 aluminium producers have agreed to cut output by as much as 10 per cent, potentially pushing the market into a supply deficit this year and beyond. Traders are asking if the power shortages in China could spread to affect the output of other base metals, such as zinc and lead.

Electricity accounts for about 45 per cent of aluminium smelting costs, so prices jumped when it emerged that more Chinese provinces had started to ration power supplies. The output cut by China’s top aluminium producers also helped boost prices.

Gold:

Geopolitical and financial worries prompted investors to buy gold as a safe haven. In the week ended July 12-13, gold rose 2.7 per cent to $957.50 a troy ounce.

Gold rose further and hit $987.75 an ounce on July 15, the highest since March 19, before easing to $985.20 an ounce later in the day. Gold has risen sharply in other currencies as well as the dollar, reinforcing gold’s appeal as a safe haven.

Gold holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange traded funds, rose to a record 705.9 tonnes on July 11. While they dipped on July 14, they remain high at 701.91 tonnes.

Technical analysts were keeping an eye on developments in currency markets with one suggesting that further downwards pressure on the dollar and a break for the euro above major resistance at $1.6020 could help pave the way for gold to climb to $1.033 an ounce.

Analysts who expect further gains for gold cite similarities between the current tensions in financial markets and the situation in mid-March when Bear Stearns collapsed.

Gold hit a record $1,030.80 in mid-march but was only able to maintain a hold above the $1,000 level for one session.