Saudi Arabia has done its bit to try and put a lid on world oil prices, but more unrest in Nigeria has emphasised how fragile the market really is.
As expected Saudi Arabia said it would raise its oil production by 2% from next month to try and curb record prices.
Sources at the conference of producing and consumer nations told media outlets that Saudi Arabia was already pumping at an annual rate of 9.7 million barrels of oil a day, up from the 9.5 million barrel mark established a few weeks ago.
Officially production will increase by 200,000 barrels a day to the 9.7 million barrels a day level, with Saudi Oil Minister Ali al- Naimi telling the media in Jeddah that state-owned Saudi Aramco will be soon adding 500,000 barrels, or 4.6%, to the kingdom’s total capacity with its Khursaniyah field.
The extra crude will be heavier, less ‘sweet’ crude which is in less demand on world markets.
Normally that would have a positive impact, even though the higher production level has been around for 10 days and is not really ‘new’. It’s always better for market sentiment to have decisions like this official: but still have to find out the length of time the Saudis will pump crude at the higher daily rate. If it was for the rest of the year, it would have an impact.
The news won’t be welcomed by OPEC members like Iran and Venezuela which want prices to be as high as possible to maximise production from their poorer quality fields and less productive fields. Opec officials made it clear they didn’t see any need for higher production, but Saudia Arabia is the heavy hitter in the group and will get its way.
But the latest news from Nigeria could undermine whatever help the Saudi move gives sentiment.
Chevron, the US oil giant, whose facilities are the latest to be targeted by rebels, says it has halted onshore oil production after one of its pipelines in Delta state was "breached” by a suspected act of sabotage.
News reports claimed a militant group said the attack was carried out by "patriotic youths".
Production of around 120,000 barrels a day of oil has been stopped by the damage to the pipeline, or around 5%-6% of the Nigeria’s daily output. The country is supposedly producing around 1.9 million barrels a day, but industry reports say the level if around 1.5 million barrels a day, hence the upward pressure on prices.
Shell also said that it shut down an oil field in Nigeria because of militant action, halting shipments by as much as 190,000 barrels a day. Both the damage to the Chevron pipeline and Shell’s shutdown happened midway through last week.
July crude oil rose $US2.69 to $134.62 a barrel in New York.
Gold fell Friday in New York on sales triggered by its rise above the $US900 an ounce mark.
Gold Thursday hit $US904.20 an ounce at the close of trading, the highest since May 28 and went higher to above $US910 an ounce Friday, which then triggered some profit taking.
Comex August gold fell 50c to $US903.70 an ounce, ending a five day rally. The metal finished the week up 3.5%.
July silver futures dropped 7.3c to $17.397 an ounce but closed 5% higher over the week.
Silver is up 17% for the year so far, while gold is only up 7.8%.
Copper hit a one-month high Friday on the weaker dollar.
Comex September copper rose 5.25 USc to $US3.8305/lb in New York after hitting $US3.84, the highest for a most-active contract since May 19.
The price rose 6.7% last week for the biggest gain since late March.
On the London Metal Exchange, three month copper rose $US105, or 1.3%, to $US8,435 a tonne (or $3.83 a pound). After last week’s solid gains, the metal has now risen 26% so far in 2008.
In London three month aluminum rose 2.2% Friday to $US3,140 a tonne on the Lethe metal rose 6.6% last week, the best gain in two years.
And despite easier grain and oilseeds prices Friday as the US Midwest floods settled, cattle futures prices rose to the highest since at least 1986 as beef prices continued to edge higher.
US wholesale beef prices are now at their highest in 13 months, as farmers withhold beasts from feedlots to lower costs. Cattle are being held for longer on the range to stock up on pastures and then put into lots for a shorter period of time. This in turn is producing leaner cattle, hence a rise in slaughtering and wholesale prices.
August cattle futures rose 1.4% Friday to $US1.0485 a pound on the Chicago Mercantile Exchange, after earlier reaching $US1.0615, the highest for a most-active contract since at least April 1986.
The US price of cattle is up 19% since the end of March led by the renewed upward move in corn prices, especially with the worst Midwest floods in more than 15 years damaging corn and soybean crops.
While corn futures prices on the Chicago Board of Trade are up 86% in the past year, they were easier Friday on the better weather in the flood zones in the Midwest.
December corn dropped 6 USc to $US7.555 a bushel on the Chicago Board of Trade: the price eased 1.2% over the week.
November soybeans fell 12.5 USc to $US15.09 a bushel and the price was off 3.3% over the full week, the biggest fall in three months.
