Oil and gold slip lower
Friday, 28 September 2007
Chris Flood
CRUDE oil prices extended their decline for a third session on Tuesday as more production was restored by oil companies in the Gulf of Mexico following storm disruptions.
Nymex November West Texas Intermediate maintained a hold above the $80 level, falling 77 cents to $80.18 a barrel, while ICE November Brent lost 62 cents to $78.29 a barrel.
US oil production in the Gulf of Mexico rose to 80.7 per cent after Tropical Depression 10 closed 62.7 per cent of capacity on Friday, temporarily suspending more output than Hurricane Katrina in 2005.
As well as storm disruptions, geo-political concerns continue to support crude prices. In Nigeria, the Movement for the Emancipation of the Niger Delta has threatened to resume attacks on oil facilities in a move which would end a four month ceasefire.
Francisco Blanch, commodity strategist at Merrill Lynch said the latest rally in crude oil prices to last week's record $84 a barrel was not the result of speculation or geopolitics but linked to underlying supply/demand fundamentals and the weakening US dollar.
"Do not exclude the possibility of an oil price spike above $100 a barrel in the near-term, if we hit a cold start to the winter," said Mr Blanch: "Even though Opec has just announced an output increase of 500,000 barrels a day, this expansion will only affect oil prices four to five months from now. In energy markets, the worst is ahead of us, not behind."
Gold fell to $726.75 a troy ounce, from New York's late quote of $731.70 on Monday, and retreating from Friday's near 28-year high of $739.
Inflows into gold exchange traded funds were running at record levels during September and speculative positions rose substantially as gold broke through the $700 level.
Traders said the market could be vulnerable to a correction or short-term profit taking with prices already having risen so far and so quickly.
"Two relatively poor trading days have taken some of the near-term shine off gold and the metal is beginning to look vulnerable to a correction lower," said John Read of UBS: "If this is to be avoided, gold will need support from other factors. Further US dollar weakness would help, as would a reversal of crude's recent softness or more inflows into the gold ETFs."
Copper held above the $8,000 level at $8,020 a tonne, helped by a fall of 500 tonnes in LME stocks and concerns over the impact on supplies from strike action in Latin America. Workers at Grupo Mexico's Cananea mine have been on strike for seven weeks and unions at Southern Copper in Peru have threatened strike action from October 2.
Lead traded at $3,395 a tonne, eyeing a move towards the record $4,000 a tonne it reached in July. Demand for lead from battery manufacturers is reported to be rising ahead of winter and available stocks have shruk to critical levels. LME stocks stand at just 21,050 tonnes, a seventeen year low and sufficient for less than one-day of global consumption.
Under syndication arrangement
with FE
CRUDE oil prices extended their decline for a third session on Tuesday as more production was restored by oil companies in the Gulf of Mexico following storm disruptions.
Nymex November West Texas Intermediate maintained a hold above the $80 level, falling 77 cents to $80.18 a barrel, while ICE November Brent lost 62 cents to $78.29 a barrel.
US oil production in the Gulf of Mexico rose to 80.7 per cent after Tropical Depression 10 closed 62.7 per cent of capacity on Friday, temporarily suspending more output than Hurricane Katrina in 2005.
As well as storm disruptions, geo-political concerns continue to support crude prices. In Nigeria, the Movement for the Emancipation of the Niger Delta has threatened to resume attacks on oil facilities in a move which would end a four month ceasefire.
Francisco Blanch, commodity strategist at Merrill Lynch said the latest rally in crude oil prices to last week's record $84 a barrel was not the result of speculation or geopolitics but linked to underlying supply/demand fundamentals and the weakening US dollar.
"Do not exclude the possibility of an oil price spike above $100 a barrel in the near-term, if we hit a cold start to the winter," said Mr Blanch: "Even though Opec has just announced an output increase of 500,000 barrels a day, this expansion will only affect oil prices four to five months from now. In energy markets, the worst is ahead of us, not behind."
Gold fell to $726.75 a troy ounce, from New York's late quote of $731.70 on Monday, and retreating from Friday's near 28-year high of $739.
Inflows into gold exchange traded funds were running at record levels during September and speculative positions rose substantially as gold broke through the $700 level.
Traders said the market could be vulnerable to a correction or short-term profit taking with prices already having risen so far and so quickly.
"Two relatively poor trading days have taken some of the near-term shine off gold and the metal is beginning to look vulnerable to a correction lower," said John Read of UBS: "If this is to be avoided, gold will need support from other factors. Further US dollar weakness would help, as would a reversal of crude's recent softness or more inflows into the gold ETFs."
Copper held above the $8,000 level at $8,020 a tonne, helped by a fall of 500 tonnes in LME stocks and concerns over the impact on supplies from strike action in Latin America. Workers at Grupo Mexico's Cananea mine have been on strike for seven weeks and unions at Southern Copper in Peru have threatened strike action from October 2.
Lead traded at $3,395 a tonne, eyeing a move towards the record $4,000 a tonne it reached in July. Demand for lead from battery manufacturers is reported to be rising ahead of winter and available stocks have shruk to critical levels. LME stocks stand at just 21,050 tonnes, a seventeen year low and sufficient for less than one-day of global consumption.
Under syndication arrangement
with FE