Oil Price Rises after Drop in Supplies

Commodity markets ended a difficult week on a high as oil prices surged higher, grains prices rose and gains for copper provided support for base metals.

Much of the commodities complex came under pressure early in the week as risk appetite weakened in the face of rising bond yields.

However, oil prices led a rally, bouncing back on Wednesday after an unexpected fall in US petrol and heating oil stocks. Crude prices extended their gains as traders anticipated significant tightening in global energy supply and demand in the third quarter.

ICE July Brent hit $71.60 a barrel before easing back to trade 66 cents higher at $71.18 a barrel on Friday, unchanged over the week, while Nymex August West Texas Intermediate rose 83 cents to $70.40 a barrel, up 1.9 per cent this week.

Approaching peak summer demand for petrol, Nymex July RBOB gasoline rose1.2 cents to $2.2785 a gallon on Friday, down 0.4 per cent this week. The July contract expired on Friday. August gasoline rose 2 cents to $2.1287.

Concerns about winter heating oil supplies are mounting as stocks stand 40 per cent below last year's levels. Nymex July heating oil gained 1.7 cents at $2.0351 a gallon on Friday, 0.1 per cent lower this week. The July contract expired on Friday. August heating oil increased 1.6 cents to $2.0426.

Grains markets were highly volatile after several major surprises in the US Department of Agriculture's June plantings report.

The USDA said US farmers planted 92.888m acres of corn this year, the most since 1944 and significantly above analysts estimates. CBOT July corn fell 8? cents to $3.31 a bushel.

The sharp increase in corn acreage will reduce the soyabean crop. The USDA forecast of 64m acres for soyabeans was significantly below analysts' estimates which ranged between 66m to 69m acres. Soyabean prices soared with the futures contracts for August 2007 through to July 2008 all up by their 50 cent daily trading limit. July soyabeans spiked by 68? cents to $8.78? a bushel as this is a delivery month with no trading limit before easing back to trade 53? cents higher at $8.63?.

Wheat prices also rose strongly with July wheat up 15? cents to $6.24? a bushel after the USDA reduced its estimate for spring wheat acreage substantially.

The USDA said 2007 spring wheat acreage totalled 13.144m acres, below the consensus forecast of 13.899m acres and 11.8 per cent below last year's 14.899m acres. In Minneapolis, where more spring wheat is traded, the benchmark for the new crop, September wheat rose 20 cents to $6.41 a bushel.

Copper rose 1.6 per cent to $7,560 a tonne this week on strike threats in Latin America. Lead hit a record $2,730 on Tuesday, gaining 4.6 per cent to $2,658 a tonne over the week.