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Financial Times: Oil races to $84 after platforms prepare for storm

By Javier Blas
Published: September 21 2007 03:00 | Last updated: September 21 2007 03:00

Crude oil prices jumped above $84 a barrel late yesterday after production platforms in the Gulf of Mexico were shut down ahead of a threatened tropical storm.

Nymex October West Texas Intermediate hit a record $84.10 a barrel, up $2.17, but settled at $83.32, up $1.39 on the day. The October contract expired at the end of trading. The most active November WTI contract was up $1.05 at $80.75.

ICE November Brent closed 62 cents higher at $79.09 after peaking at an all-time high of $79.23.

Oil companies such as BP and Shell closed about 360,000 barrels a day of production or 27 per cent of the total in the Gulf of Mexico.

Agricultural commodities rose as Russia confirmed plans to curtail cereal exports and China said that it would encourage grain imports to cool down domestic food inflation. Wheat prices climbed after Russia said that it planned to levy an export tariff of 10 per cent on foreign wheat sales if prices continued to rise.

German Gref, Russian economics minister, said that details of the move would be announced next week. He added “there will be an intervention if prices exceed a certain range. In this case, there will be an export tariff of 10 per cent”.

At the Chicago Board of Trade, December wheat rose 13 cents to $8.58 a bushel. CBOT wheat last week reached a record high of $9.11¼ a bushel. In Paris, Euronext Liffe January milling wheat rose €3 to $255 a tonne.

Cereals traders said the Russian measure would reduce Moscow cereals sales. It is unclear if a 10 per cent tariff will be enough to curtail exports significantly. Russia is the world’s fifth-largest wheat producer and exporter, according to Deutsche Bank.

Any reduction in Russian supplies would increase demand for US wheat. US wheat exports are already 114 per cent above the 2006-07 marketing year’s level, according to data from the US Department of Agriculture.

Moscow is trying to keep its domestic market well supplied to put a lid on food inflation ahead of legislative elections in December, traders said.

CBOT December corn rose 15 cent to $3.73¼ a bushel, the highest price since late June. China said it would encourage imports of corn as rising food prices pushed inflation in August to an 11-year high of 6.5 per cent.

“A proper amount of imports will be encouraged to meet domestic demand,” said the Chinese National Development and Reform Commission, the country’s main planning body, in guidelines for the corn industry.

The CBOT December soyabean contract surged to a three-year high of $9.96¾ a bushel after reports that China would cut import tariffs from 3 per cent to 1 per cent to attract more supplies and cool food prices. It later traded 20 cents higher to $9.91 a bushel.

Rising agriculture commodities prices come on top of record freight costs.

The Baltic Dry Index, a gauge of shipping costs for dry bulk commodities such as grain, iron ore and coal, hit an all-time high of 8,619 points, up 2.25 per cent on the day. The index has set records since July on strong demand from emerging countries, port congestion in Australia and Brazil, and longer trade routes.

Base metals were mixed after strong gains on Thursday. In late trading on the London Metal Exchange, copper, the industrial metals’ bellwether, rose 0.1 per cent to $7,890 a tonne while aluminium lost 1.7 per cent to $2,443 a tonne.

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