Oil closes near four-month low

Crude futures fell Friday December 10, 2004 to close at a near four-month low after the Organization of Petroleum Exporting Countries (OPEC) deciding to cut its production by about 1 million barrels per day. It also left its options open for a future adjustment to the quota by agreeing to meet again on January 30, 2005 ahead of the regularly scheduled March 16 meeting. Following the OPEC announcement crude slipped substantially losing nearly 4% week-on-week. Crude is currently quoting below US$40 per barrel on Comex division of New York Mercantile Exchange.

Gold lost 5% last week

Strengthening of dollar shaved 5% off gold future prices from its peak level of US$458 per troy ounce, during the last week. Gold futures slipped to near US$430 levels before retracing back and closing the week at US$435 a troy ounce. Silver too ended lower below US$7 an ounce after marching above US$8 an ounce last week. Federal Reserve will be meeting this week and is likely to revise interest rates upward considering the pick up in US wholesale prices. Dollar has gather strength after the data suggested stronger than expected growth in US wholesale prices.

In the domestic bullion markets, after witnessing sharp decline in prices over the last few days, the spot gold prices edged up marginally to Rs6,400.

Gold to touch US$500 next year

Looking at the growing demand for gold and the prevailing economical condition of US, the bullion analyst are quite upbeat about gold prices in the near future. The yellow metal is expected to reach a 20-year high in the near future and looks set to surge as high as US$500 an ounce next year. According to the poll conducted polled by Reuters, the data firm, more than two-thirds of analysts predicted that the price could rebound to US$500 in 2005 — 15% above current levels.

Meanwhile, the American currency has weakened by 9% against the pound over the past 12 months; gold is up 7% over the same period and 70% above its low of US$253 in 1999.

Govt rules out export incentives for sugar

The Union Government has ruled out the restoration of export incentives for sugar, including re-imbursement of expenditure by mills on internal transport and neutralization of ocean freight disadvantage. According to the reply given by the Ministry of Consumer Affairs, Food and Public Distribution to the Parliament Standing Committee of the Ministry, these incentives were provided in the context of a glut in domestic production. The country produced a record 20.10mn tons of sugar during the 2002-03 season (October-September), which left opening stocks of 10.26mn tons as on October 1, 2003. But with output during 2003-04 plunging to 14mn tons, the carryover stocks have fallen substantially at the end of the season. The Ministry has estimated production during the ongoing 2004-05 period to decline even further to 12.5mn tons, with domestic consumption being around 18.5mn tons.

Futures trading in tea in limbo

The Forward Markets Commission (FMC) has asked the Coonoor-based Upasi Commodity Exchange Limited (UCE), promoted by the Upasi for conducting futures trading in tea, to go for a tie-up with one of the multi-commodity futures exchanges, as the license granted to it to launch tea futures has expired.

Record world vegoil production this year

World oilseed production for 2004-05 is projected to scale a new high of 390.54mn tons, a massive 54mt over 336.73 mt last year. Correspondingly, world vegetable oil production too will set a new record — 106.13 mt against 100.60 mt during 2003-04. Record soyabean output in the US is contributing to higher global supplies. Global soyabean production is projected at a new high of 231 mt for 2004-05, sharply up from weather and disease-affected lower output of 189.8 mt last year.

All the major origins are projected to produce more soyabean this year, according to the US Department of Agriculture (USDA). Soyabean output in the US is unchanged from last month at 3,150 million bushels equivalent to 85.74 mt, a massive increase from last year's 66.78 mt.

China's output is marginally up from last month at 18 mt due to higher projected yield, and higher than last year's 15.4 mt. Higher output is forecast for Brazil at 64.5 mt (52.6 mt) and Argentina at 39 mt (34 mt).

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