Crude to cruise at $50 a barrel

Crude prices are gaining momentum in the oil market internationally and it is very likely to touch the $50 a barrel in near future. Crude prices, which jumped $1.22 to $48.53 on Friday, are up 17 percent since late December, in large part because of growing anxiety about two key events coming Sunday: Iraq's elections and a meeting of the OPEC. According to the traders, any effort by OPEC to curb its output further also could push oil prices higher. OPEC members agreed last month to reduce production by 1 million barrels a day, or 3.6 percent, to 27 million starting Jan. 1 to maintain prices above $40 a barrel. One of the opinions on rising prices of crude is that of weakness in dollar, it is also forcing the crude to stay at higher than $40 level. On the wake of Iraqi elections, traders are wondering whether political turmoil could pose a continuing threat to crude exports from Iraq. It seems that smooth elections will put some pressure on the crude and taking it to lower levels, but on the contrary, the case could be otherwise if there are any adverse situations during the polls.

Gold on narrow gains

Fresh investment demand on the wake of violence in Iraq and some weakness in the U.S. dollar was visible on Monday which pushed the price levels above US$427 from the early lows of January. The market is drawing strength in part "from the increase in violence in Iraq over the weekend," said James Moore, an analyst at TheBullionDesk.com in London. Militant leader Abu Musab al-Zarqawi vowed that Iraqi insurgents would seek to disrupt elections scheduled for Sunday. Comex division of NYMEX witnessed the metal jump of 20 cents raising the prices to end at US$427.10. According to Mr. Moore, Gold has seen another day of Euro watching so far, trading $426.50-28, and is likely to remain in this mood over the next couple of weeks in the build up to the G7 summit in early February which could either add some support to the faltering US dollar, or send it plunging lower.

At the domestic market, Gold for February contract at MCX opened at Rs6137 for 10gms and ended at Rs6139 after a day’s high of 13 rupees at Rs6150.

Steady moves in Rubber trading

On Monday, 24^th January, the rubber market moved very steady as the traders were in a wait and watch mode. Surprisingly, the international market was much active and rubber prices were in a firm rise. At the domestic segment, it is apparent that the trades are going through a dull phase since last month and only scattered deals are taking place on an average day in the spot market. According to the news agencies, cause for this inactivity in the rubber market is the proposed introduction of VAT from April 1 and the confusion regarding the purchase tax began to affect the dealer's sentiments. On Monday, the domestic market NMCE rubber futures turned weak though TOCOM closed better. The February contract was quoted at Rs 53.67 (Rs 53.90), March at Rs 54.85 (Rs 55.02), April at Rs 57.02 (Rs 57.02) and May at Rs 57.98 (Rs 58.02) per kg for RSS 4. Whereas, at TOCOM, February futures for RSS 3 improved to 127.6 yen from 124.1 yen and at Bangkok the same grade improved by 12 paise to 52.50 against the previous closing.

Rabi crop sets foodgrain output at 206.39 mt

Recently released Agriculture Ministry's Second Advance Estimate of production for 2004-05, the country's foodgrain output this year, at 206.39 mn tonnes (mt), is lower than the 212.06 mt figure for 2003-04. Due to poor monsoon rains, the kharif output went for a setback for the year and the decline was from 112.05 mt to 102.94 mt. Interestingly, the year-end rains and expectations of a good harvest sets the rabi output during 2004-05, at 103.45 mt, this exceeds the previous year's level of 100.01 mt. However, these are still early figures because the crucial rabi crops such as wheat, mustard and gram are still a couple of months away from being harvested. A caution would to be closely monitor the temperature pattern for forthcoming months as any adverse movement could completely change the scenario.

According to the news agencies, wheat output during 2004-05 is estimated to touch 73.03 mt, up from last year's 72.06 mt. Production of rice, too, is slated to go up marginally, from 87 mt to 87.80 mt. the production of coarse cereals is estimated to register a sharp dip, from 37.77 mt in 2003-04 to 31.88 mt in 2004-05. While output of jowar is expected to rise (from 7.33 mt to 7.53 mt), it would be contrary in the case of maize (14.72 mt to 13.58 mt) and bajra (11.79 mt to 6.46 mt). Pulses production is also expected to be lower, at 13.67 mt during 2004-05, against the all-time high of 15.23 mt for the previous year. The output of gram is expected to rise marginally from 5.77 mt to 5.78 mt this year.

In the oilseeds sector also, output for 2004-05 is set at 248.42 lakh tonnes which is lower by 3lakh tonnes than previous year’s 251.43 lakh tonnes. The rabi output is expected to contribute higher at 100.81 lt against 81.34 lt of 2003-04. Higher production estimates are also projected for sunflower whereas groundnut and soybean is set lower.

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