LONDON: Oil dropped below $145 a barrel on Friday, but was still within sight of record highs reached in the previous session when traders bought into the market ahead of a holiday weekend in the United States.

US crude oil was down $1.40 at $143.89 a barrel, below an all-time high of $145.85 hit on Thursday. The contract has risen more than 50 percent this year.

London Brent was down $1.19 at $144.89. Prices fell more than a dollar after Iran said it would make a response later on Friday to proposals from six world powers to try to resolve a long-running dispute over its nuclear development programme.

Investors have rushed into crude oil ahead of the US independence day holiday on July 4, because they are wary of any escalation in tensions between Iran and Israel that have contributed to oil’s rise to a record of $145.85 this week.

Oil has risen about 50 percent this year, driven partly by the tensions over Iran’s nuclear programme, plus expectations that global oil supplies will not be able to cope in the long term with strong demand growth from newly industrialising China and India.

The price spike has caused fuel protests worldwide and has begun to dampen demand in consuming nations, including the United States, the world’s biggest energy consumer. The next milestone is $150 a barrel, which some analysts had predicted the market could reach by July 4.

The weak US dollar has also played a part in boosting oil, which is priced in the US currency. The dollar drew some support on Friday after European Central Bank President Jean-Claude Trichet appeared to play down chances of further interest rate rises.


KARACHI: Dollar weakened against the national currency, as its demand plummeted in the inter-bank on Friday. The greenback shed by 19 paisas in the inter-bank during closing hours trading at Rs 69.59 for buying and Rs 69.64 for selling compared to 69.78 in the previous session.

An analyst in his comments said dollar failed to maintain its strength and its demand has fallen in the inter-bank. Pound streling also weakened against the national currency as it closed at Rs 137.96 at buying and Rs 138.14 at selling compared to 138.52 in the previous session making the national currency weaker by Rs 0.56 paisas. Euro also weakened against rupee as it closed at Rs. 109.24 at buying and Rs 109.44 at selling compared to Rs. 110.78 in the previous session thus the national currency shed Rs 1.54.

Open market: The American dollar gained strength against the national currency in open market on Friday, as it closed at Rs. 69.60 at buying and Rs. 69.90 at selling compared to Rs. 69.50 in the previous session gaining 10 paisas. Pound Sterling weakened against the national currency in the open market as it closed at Rs 136.50 at buying and Rs 136.90 at selling shedding 30 paisas. Like pound sterling, euro also weakened against the national currency. It closed at Rs 108.20 at buying and Rs 108.60 at selling compared to Rs 109.10 in the previous session losing paisas 0.90.



BRUSSELS: The dollar’s fall is a source of global concern and the European Union wants a better balance between the US unit and other major currencies, European Commission President Jose Manuel Barroso said on Friday.

Speaking to a group of journalists before departing for the annual Group of Eight industrial nations’ summit in Japan next week, Barroso endorsed the European Central Bank’s decision to raise its key interest rate despite warnings from some EU governments, notably France.

“I believe it is important we show at European level that we are committed to fighting inflation,” he said. “Inflation is a real threat,” he said, adding it would have been very difficult to understand any other decision by the ECB, which raised its key rate by 25 basis points to 4.25 percent on Thursday.

In an indirect rebuke to French President Nicolas Sarkozy, who had warned publicly that a rate hike would harm a slowing euro zone economy, Barroso said: “When it comes to inflation, I have more confidence in the positions of the central banks than of politicians.”

The head of the European Union executive said he did not expect the G8 leaders to take a stand on currencies but added: “This is a matter of global concern, the falling dollar.

“We would like to see a more balanced relationship between the dollar and other major currencies, including the euro.”

Climate change and soaring fuel and food prices are likely to be the main themes of the G8 summit at a luxury hotel in Hokkaido, northern Japan.

Barroso also said he hoped U.S. President George W. Bush would show more ambition than in the past about curbing emissions of greenhouse gases blamed for global warming.


LONDON: Gold inched lower in Europe on Friday as the dollar held onto the last session’s gains against the euro and as oil prices eased. Concerns over rising inflation are firmly underpinning the metal, however. Trading is set to be light on Friday with New York closed for the Independence Day holiday, potentially leading to increased volatility in the market. Gold eased to $931.00/932.00 an ounce from $932.70/934.70 late in New York on Thursday. Nonetheless traders expect to see the metal well supported above $930 an ounce, as inflation fears driven by high energy prices boost the precious metal’s appeal as a hedge. Gold dipped one percent in New York on Thursday as the dollar rallied against the euro, benefitting from a less hawkish than expected outlook on interest rates from the European Central Bank and firmer-than-forecast US payroll data. Among other precious metals, spot platinum fell to $2,003.00/2,023.00 an ounce from $2,017.50/2,037.50 late in New York. Spot palladium slipped to $452.50/460.50 an ounce from $460.50/468.50 an ounce, while silver eased to $18.04/18.10 an ounce from $18.21/18.31.

Copper slips, lead falls to 17-mth low: Copper prices slipped on Friday as worries about supply disruptions in Peru receded and as the market fretted about a slowing of demand in China, the world’s largest consumer. Lead traded down at $1,565 per tonne in official rings on the London Metal Exchange from $1,610 at the close on Thursday. Earlier the battery-making material lost 4.9 percent to $1,531 — the lowest since February 8 2007. Copper for three-month delivery traded lower at $8,500 in open outcry trade, compared with $8,655 at the close on Thursday. Lead extended the previous day’s losses, when it dropped 6 percent, as investors worried about oversupply in the market. Lead stocks in LME warehouses rose by 175 tonnes to 100,675, more than double the level in January and the highest in almost two years. Zinc was untraded in the rings, but was bid at $1,761 a tonne compared with $1,783 on Thursday’s close. Earlier, it traded at $1,750, its lowest level since December 2005. Nickel slipped to $20,650 a tonne against $20,850, hovering above a two-year low of $20,625 reached on Thursday. Aluminium traded at $3,154.5 a tonne from $3,184. On Thursday it reached $3,229 — the highest level since March 7. Tin was bid lower $22,450 a tonne from $22,850.



How to get high oil prices down will top the agenda as leaders from the Group of Eight rich countries meet for a summit in Toyako, on Japan’s northern island of Hokkaido, from July 7-9. Here are some facts about the issue:

Prices

* Global oil prices doubled in the past year and have risen by 50 percent since the start of 2008, triggering fears over inflation and slower economic growth.

* The record run set a new high over $145 a barrel on July 3, well beyond the previous inflation-adjusted peak of $101.70 in April 1980, a year after the Iranian revolution.

Reasons

* Rising demand and growing investor interest spurred by worries about the global economy and the weaker dollar have been identified as factors.

* Daily demand of roughly 86 million barrels is almost the same as supply. Growing demand from emerging economies such as China and India is stretching supplies.

* Sanctions, then war, have disrupted Iraq’s output for years. Sanctions have also limited exploration in Iran and violence has interrupted flows in Nigeria. Meanwhile high prices have fuelled a trend for resource nationalism.

* Even with plentiful crude there may not be enough refined diesel and gasoline, due to a lack of refining capacity.

Impacts

* European truckers and fishermen have led street protests from London to Barcelona. Several Asian nations have scrapped controls and hiked prices, angering consumers.

* Commercial airlines in the United States and Australia have cut routes and staff. US automakers have reported slowing sales.

* Above $4 a gallon gasoline has become a major campaign theme for Democrat presidential hopeful Barack Obama and his Republican rival John McCain for the US Nov election.

* Lost consumer spending power is hurting retailers, as people cut back on non-essentials. Company profits are being eaten up by the huge rise in energy costs.

Responses

* World leaders and policy-makers are under pressure, but effectively powerless to control the price of oil.

* In June G8 energy ministers pledged domestic cuts through energy efficiency and the development of green alternatives.

* Led by Italy, the G8 wants new curbs on speculators to subdue prices, a move the US Congress also discussed and the International Monetary Fund may report on later in the year.

* Saudi Arabia, the world’s biggest exporter, raised output to near 9.5 million bpd in June, up from around 9.1 million bpd in May, and has promised 9.7 million bpd in July.

* The Organization of Petroleum Exporting Countries (OPEC) has not officially increased output since a meeting last September and has no plans to meet formally until Sept 9.

* China, India and other developing Asian nations have raised domestic fuel prices to curb rising subsidy costs, potentially helping slow future demand growth by passing on some of the surge in global prices.

Forecasts

* Global demand for crude is forecast to rise from the first quarter’s 85.98 million barrels per day (bpd) to 87.69 million bpd in Q4, the IEA said in a June report.

* The IEA’s mid-long range forecast is for tight world supplies to 2013, with capacity at 95.33 million bpd by 2012.

* Reuters’ latest oil poll found analysts expect more price rises for the foreseeable future. Previous polls said US crude would stop rising in 2008 and fall in 2009/2010.



SAPPORO: Between surging oil prices, food inflation and a credit crunch that's depressed global growth, leaders from the Group of Eight economic powers face the gravest combination of economic woes in at least a decade when they gather on 7 July.

The outlook has darkened dramatically since last year's summit in Germany, when the leaders declared the global economy was in "good condition" and oil cost $70 a barrel, which seemed high at the time.

Since then, the US subprime mortgage crisis has erupted, roiling markets and battering financial firms. Oil has doubled to above $140 and food prices have jumped, hurting the poor in particular and raising the threat of political instability.

"Things have changed for the worse across the board," said Robert Hormats, vice chairman at Goldman Sachs (International) Corp. in New York.

Hormats argues that the economic problems now are more serious and widespread than during the Asian financial crisis of 1997-98, where the pain was largely limited to emerging markets.

"Now you have a financial disorder where the epicenter is the US," he said. And fuel and food inflation "are serious matters that affect large numbers of people."

Host Japan had put global warming at the top of the summit's agenda, but the dilemma of how to respond to accelerating inflation and slowing global economic growth could grab the spotlight.

Prime Minister Yasuo Fukuda has said he hopes the July 7-9 meeting at a hot springs resort in Hokkaido, Japan's northern island, will "show some direction" in tackling oil and food prices but stressed it was only "one step" in a longer process.

On oil, analysts are skeptical that the G-8 leaders, representing the US, Japan, Britain, France, Germany, Russia, Italy and Canada, will come up with much beyond urging major petroleum producers to boost output, reiterating the message of their finance ministers, who met last month in Osaka.

Foreshadowing possible disagreement among the leaders, the finance ministers were divided on where to assign blame for the run-up in oil prices. Germany, France and Italy held speculators largely accountable, while the US and Britain said the focus needed to be on boosting production capacity that has barely kept up with growing global demand.

Soaring crude prices have already forced India, Malaysia, and Indonesia to cut subsidies and raise state-set prices on gasoline and other fuels. Last month, China hiked fuel prices as much as 18%.

At the same time, prices of corn, wheat, rice and soybeans and other farm goods have surged due to changing diets, urbanization, expanding populations, extreme weather, growth in biofuel production and speculation.

Spiraling fuel and food costs could drive millions into poverty, the Asian Development Bank has warned. In India, inflation has jumped to a 13-year high of 11.63%.

On the food front, the G-8 leaders may announce an aid package or pledging agricultural investment in poorer countries, experts say.

The credit crisis and global market turmoil are sure to be discussed, but with central bankers absent the leaders will most likely avoid saying anything specific about interest rates and currencies. The European Central Bank raised its benchmark interest rate a quarter point Thursday, suggesting it saw inflation as a greater threat than slower growth. Overall, the summit's main goal will be demonstrating confidence that they can "work through the oil crisis without causing the global economy to melt down," said Tom Cooley, dean of New York University's Stern School of Business.

"The key thing is not what they do at these meetings but what they do at home," he said. Oil and energy have remained recurring themes at the annual summits, said Hormats, who participated in several of the first meetings, which started in 1975. That initial gathering came after the 1973-74 oil embargo, when fuel prices surged after Middle East oil producers cut off the US and other countries supporting Israel.

"We now have another oil crisis," Hormats said. The summits were originally meant to focus on economic issues, but the agenda has expanded to include terrorism, Africa's development and the environment.

The group's membership also has grown from six to eight, adding Russia in 1997. But many argue that it should be expanded to include China, the world's fourth-largest economy, and other emerging powerhouses like India and Brazil, especially to tackle global issues like energy and climate change.




http://dailytimes.com.pk/default.asp?date=7/5/2008

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