Markets

Commodities

CRUDE FALLS AS MILD WINTER EASES SUPPLY FEARS
By Kevin Morrison and Tom Braithwaite

Financial Times (UK)
February 7, 2005

http://news.ft.com/cms/s/bba05de4-78f9-11d9-89c5-00000e2511c8.html

Crude oil futures fell as much as $1 on Monday as the mild winter eased concerns about a supply crunch in U.S. heating oil, while the prospect of an early production cut by the Organisation of the Petroleum Exporting Countries also receded.

Reports that Iraq expects to resume pumping oil within a week along the northern pipeline to the Ceyhan in Turkey, ending seven weeks of stoppage caused by sabotage attacks, also weighed on prices.

The fall in oil prices came at a time that trading interest in U.S. crude futures moved close to the record highs seen last year, according to the latest weekly data from the Commodity Futures Trading Commission, the U.S. industry regulator. IPE Brent for March delivery dropped 61 cents to $43.28 a barrel in late afternoon London trade, off its intra-day low of $43.10. March Nymex WTI fell to a month's low of $45.35 a barrel, before bouncing higher to $45.55, an 83 cent slide in early afternoon New York trade. PFC Energy, the Washington-based energy consultancy, said in its monthly oil market report the mild winter had weakened the fundamentals for oil demand and the next four to six weeks will likely be the low point of the year for prices. It said unlike last year, gasoline will not fuel a price rally this year. However, PFC Energy said oil prices are likely to remain firm for the rest of the year. "Several other factors will combine to keep a floor under prices: the ongoing strength of Chinese demand growth; the abrupt slowdown in Russian supply growth; and the seemingly never-ending string of small supply problems that add up to significant lost volumes that a system as tightly stretched as this one can ill afford," it said. Gold prices fell on Monday as a stronger dollar and the prospect of the International Monetary Fund selling some of its reserves weighed. The IMF, the world's third largest holder of gold, with about 104m ounces -- is to look at whether selling some reserves to help pay down third world debt would benefit poor countries without harming the market. Gold slipped to $412.70/$413.50 a troy ounce in late London trade, down from the late quote of $415.20/$416.00 in New York on Friday. An upturn in the dollar, to a three-month high of $1.285 against the euro, added to the downward pressure on gold. Robusta coffee futures reached a two-year high in London when the May contract, which is the most actively traded, touched $872 a ton, and has now risen 26 per cent in the past month on projection of a rare coffee production deficit this year. This is the highest price for a second-month contract since February 2003.