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Shell says exports and output unaffected by fire at major pipeline carrying crude to Bonny export terminal

Financial Times: Gold back above $900 as wild oil swings continue

By Chris Flood
Published: April 4 2008 03:00 | Last updated: April 4 2008 03:00

Gold regained the $900 level yesterday while oil, base metals and grains put on a mixed performance.

Gold rose 0.9 per cent to $906.30 a troy ounce, ahead of today’s vital US employment data. Gold was boosted by the cautious tone of Ben Bernanke’s latest comments after the Federal Reserve chairman admitted for the first time that a US recession was a possibility.

Oil prices swung in a wide range after a strong surge late in Wednesday’s session.

Nymex May West Texas Intermediate settled $1 lower at $103.83 a barrel, trading between a session high of $106.44 and a low of $103.21.

Ed Morse, of Lehman Brothers, said the oil market appeared to be on the verge of a turning point and that crude prices would decline from their current levels.

Lehman expects oil demand in the OECD to fall by 100,000 barrels a day in both 2008 and 2009, mainly due to weakness in the US economy. As a result, Lehman is projecting a 300,000 b/d increase in global oil inventories this year, which could rise to 1.4m b/d in 2009 if Opec does not cut output.

Mr Morse cautioned that weather factors and delays in commissioning Saudi Arabia’s 500,000 b/d Khursaniyah field could push oil prices higher in the third quarter of 2008 but said that over the next five years, a surge in refining capacity should relieve supply bottlenecks and lower prices.

In Nigeria, a fire at a major export pipeline carrying crude to the Bonny export terminal continued to blaze for a fifth day. However, Royal Dutch Shell said exports and output had not been not affected.

ICE May Brent lost $1.23 to $102.52 a barrel.

US petrol prices eased with Nymex May RBOB unleaded gasoline down 3.9 cents at $2.7362 a gallon after hitting a record $2.7836 on Wednesday.

The latest US weekly inventories data showed an unexpectedly large decline of 4.5m barrels in gasoline stocks, which has fuelled concerns about supplies.

US rice prices hit record levels after Vietman extended its ban on rice sales until June. The move by the world’s second largest rice exporter compounds growing supply tightness following India’s recent decision to ban exports of non-basmati rice. However, senior officials in Thailand quashed Hong Kong press reports that the world’s largest rice exporter was considering export limits to protect domestic supplies.

In Chicago, CBOT July rough rice futures rose 46 cents, or 2.3 per cent, to a record $20.60 a hundredweight.

Corn prices traded unchanged at $5.9575 a bushel in spite of healthy weekly US export sales of 704,400 tonnes, towards the top of the range of market forecasts.

The reduction in land for corn production this year to 86m acres, which was projected earlier this week by the US Department of Agriculture, means US corn stocks are likely to decline to a “precariously low” 400m to 600m bushels, according to Lewis Hagedorn of JPMorgan.

Mr Hagedorn warned that there was an acute risk of corn prices moving significantly higher unless farmers decided to plant more corn than the USDA had forecast.

CBOT May soyabeans rose 14 cents to $12.57 a bushel. Farmers in Argentina have suspended strike action which has paralysed grain exports and will negotiate for a repeal of higher soyabean export taxes with the government.

CBOT May wheat added 9½ cents to $9.46 a bushel.

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