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Financial Times: Opec output vow leaves crude at two-month low

EXTRACT: A total of 17 foreign oil employees have been taken by Nigerian rebels so far this month, with nine being released. The attacks have led Shell to reduce production from the nation by 0.5m barrels per day.

THE ARTICLE

By Michael Hunter

Published: August 18 2006 03:00 | Last updated: August 18 2006 03:00

Oil prices sank to two-month lows yesterday after the Organisation of the Petroleum Exporting Countries said it did not expect to reduce production for the rest of the year.

Nymex West Texas Intermediate for September delivery settled $1.83 lower at $70.06, its weakest level since June 26. ICE October Brent closed down $1.25 at $71.58 a barrel.

Crude prices have fallen for six of the last eight trading periods, aided by easing geopolitical tensions and news that BP will keep half of its Prudhoe pipeline open during repairs. There also were further falls after news of bigger-than-expected US crude inventories last week.

Edmund Daukoru, Opec president, said the cartel had no intention of cutting production or restoring its quota system for the rest of the year as crude prices continued to move away from the highs reached in June.

Mr Daukoru, in Brazil attending a discussion on biofuel production, said: “We will continue to produce, to show the market that there is an excess in production and that high prices are more a result of limits in refining capacity.”

After another oil worker was kidnapped in Nigeria, Kevin Norrish, analyst at Barclays Capital, said question marks remained over non-Opec oil producers and their aggregate ability to raise output quickly.

A total of 17 foreign oil employees have been taken by Nigerian rebels so far this month, with nine being released. The attacks have led Shell to reduce production from the nation by 0.5m barrels per day.

Metals prices were boosted in intraday trade by a weakening dollar, but eased from session highs late on as safe havens lost ground. Weaker July retail sales data soothed fears on inflation.

Gold fell to $621.80 a troy ounce from intraday highs of $631.70, as investors continued to react to the improving geopolitics by liquidating holdings.

Other precious metals were rangebound, with silver at $12.11 a troy ounce and palladium at $338 a troy ounce.

Copper traded down to $7,285 per tonne from $7,690 at the end of the previous session after the union representing strikers at Escondida, the world’s largest copper mine in Chile, reduced its wage claim to 10 per cent from 13 per cent. Although this raised hopes for a settlement, both sides still appeared far apart.

Coffee futures rose as producers continued to exploit trading around the top of the range. Contracts for Arabica beans for December delivery rose by one tenth of a cent to $1.087 per pound.

Rwanda said its crop could rise by as much as 44 per cent in 2006 to 26,000 metric tons. Good growing conditions after improved rainfall levels were behind the rise.

Copyright The Financial Times Limited 2006

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