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The Commodities Report

165ad5e6-4b2e-40b1-b7aa-6399bb63890d

9

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Gold continues its rally

Tue, Nov 10 2009, 10:19 GMT
by KBC Market Research Desk

KBC Bank

Headlines

• Hurricane Ida together with weak greenback return crude towards 80$/b

• Gold continues its rally

• Base metals gain underpinned by weakness in the U.S. currency

Brent and Distillates

Oil rose more than 1$/b, recouping some of the previous session's loss on fears a powerful hurricane would cut U.S. oil and gas supplies from the Gulf of Mexico. The Gulf Coast region is home to nearly half of U.S. refinery capacity while offshore oil fields make up nearly 30% of U.S. domestic crude supply. Moreover, crude was also lifted by the falling dollar.

U.S. oil companies were shutting production on Sunday as they evacuated workers from the Gulf of Mexico ahead of Hurricane Ida, which is forecast to roar across the offshore oil patch Monday before making landfall on Tuesday.

Nevertheless, today oil prices ease as tropical storm Ida that cut U.S. oil and gas supplies was downgraded from a powerful hurricane and U.S. crude oil stockpiles were forecast to rise slightly.

An oil price about 80$/b in 2010 is realistic and reasonable,"OPEC President Jose Botelho de Vasconcelos said last week. "At this moment, oil prices are more or less at an acceptable level," the president said at an oil sector meeting in Ecuador. Also U.A.E. Oil Minister al-Hamli said that raising oil production was not currently on the agenda for OPEC.

Iraq has lowered the official selling price of Basra light crude to U.S. buyers for November by 1.45$ to 4.95$ below the WTI benchmark, the State Oil Marketing Organisation said.

Major oil exporters in Latin America and the Middle East have expressed "strong interest" in switching the basis of their oil prices to Argus's U.S. Sour Crude Index (ASCI) following Saudi Arabia's adoption of the index. The decision to adopt the ASCI was due to "wild" variations in the barrels traded on the U.S. Gulf Coast and those priced of WTI.

The Argus Sour Crude Index (ASCI) represents the daily value of U.S. Gulf coast medium sour crude, based on physical spot market transactions. The ASCI primarily serves buyers and sellers of imported crude that need a broader index of U.S. sour crude value for use in long-term contracts.

International oil companies have formed at least five consortiums to bid on the massive Carabobo project in Venezuela's Orinoco heavy oil belt, sources involved in the process said. Despite fears generated by the OPEC nation's history of nationalizing oil assets, 16 companies have expressed interest in bidding on the project.

Venezuela ranked China's top fuel oil imports supplier in September with the Chinese customs processing 357,314 t from the country during the month. The amount represented an increase of 17.5% from 305,006 t in August, and was relatively steady from 356,527 t the Latin American supplier shipped to China a year earlier, recent figures released by the Chinese customs showed. The Venezuela-origin shipments accounted for 22.4% of China's total fuel oil imports of 1.6 mln.t in September.

In 1999, Russian oil production just about topped 6 mln.b/d as the country struggled to recover from its Soviet-era output highs. By October 2009, Russia's oil production exceeded 10 mln.b/d for the first time in the post-Soviet Union era.

Iran, a regular exporter of fuel oil, was expected to cease spot exports from November through to the end of March, as it looks to meet domestic demand for power generation during the winter, industry sources said on Monday.

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Published on  Tue, Nov 10 2009, 10:27 GMT