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Financial Times: Oil steadies as pressure for Opec cut grows

By Chris Flood
Published: October 5 2006 10:58

The weak tone for commodity markets continued on Thursday as oil showed little sign of rallying after recent weakness in spite of growing speculation that the Organisation of the Petroleum Exporting Countries will cut output by at least 1m barrels a day in the near future.

Crude oil in a narrow range, steadying after recent falls, amid renewed concern about supply disruptions in Nigeria. Militants and Nigerian troops engaged in a major firefight near an oil pumping station operated by Shell on Wednesday.

Nigerian militants claimed they killed 17 soldiers in two separate gun battles and threatened further attacks on strategic oil facilities.

ICE November Brent traded 1 cents firmer at $59.23 a barrel having sunk to its lowest level this year in the previous session at $57.70 a barrel.

Nymex November West Texas Intermediate rose 13 cents to $59.54 a barrel in electronic trade.

Pressure for a major production cut to stabilise prices is growing among members of the Organisation of the Petroleum Exporting Countries after Kuwait became the first Gulf state to indicate it was ready to reduce output following Nigeria and Venezuela’s recent moves to cut production by a total of 170,000 barrels a day.

The cartel is due to meet in Nigeria on December 14 amid growing speculation that Opec will cut output by at least 1m barrels a day or 4 per cent of daily output.

The latest weekly US inventories data showed a larger than expected increase in crude stocks of 3.3m barrels, well above the consensus market forecast for a 0.5m barrel decline. This provided further evidence to Opec members who see oil supplies as plentiful currently. will add to Nymex November West Texas Intermediate fell to as low as $57.75 a barrel before recovering to trade 4 cents higher at $58.72 as barrel.

Gold traded at $566.70 a troy ounce with traders concerned that a move below the $560 level could pave the way for a decline towards $543.

Pressure from weakness in oil and a decrease in concerns about inflation has led to gold’s decline.

Earlier this week. the US Institute of Supply Management (ISM) non-manufacturing survey released was weaker-than-expected.

“The worst non-manufacturing ISM release in many months tempered inflation concerns and undercut the precious metals” said analysts at HSBC.

Silver traded at $10.76 a troy ounce. Platinum and palladium were at $1,078 and 295 a troy ounce respectively.

The weak tone for base metals also continued with copper trading at $7,180 a tonne while aluminium was at $2,495.5 a tonne.

David Thurtell, analyst at BNP Paribas said “The professional money appears to be switching out of copper and into aluminium.”

Nickel was at $28,800 a tonne while zinc traded at $3,35 a tonne.

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