COMMODITIES : Oil, Platinum Futures Soar on Word of OPEC Agreement
The OPEC agreement to cut oil production sent energy and platinum futures soaring Monday on the New York Mercantile Exchange but other precious metals posted only moderate gains.
On other markets, grain, soybean and coffee futures fell sharply; cattle futures were mostly higher while pork futures were mostly lower, and stock index futures advanced.
West Texas Intermediate crude oil for delivery in January soared as high as $15.80 a barrel in early trading on news of the agreement among oil ministers of the Organization of Petroleum Exporting Countries meeting in Vienna.
But a statement from the United Arab Emirates later in the day that it did not consider its new production limit an official quota sparked some selling on fears that the fragile OPEC agreement could come undone, analysts said.
Still, nearly all energy futures contracts advanced their daily trading limits--$1 a barrel for crude oil and 2 cents a gallon for heating oil and gasoline. The contracts for near-month delivery have no limits.
West Texas Intermediate crude settled $1 to $1.06 higher, with January at $15.03 a barrel; heating oil was 2 to 2.93 cents higher, with December at 48.65 cents a gallon, and unleaded gasoline was 1.91 to 2 cents higher, with December at 46.37 cents a gallon.
The deal signed by all 13 OPEC members reestablishes a crude oil target price of $18 a barrel and reduces production from the current estimated 22.5 million barrels a day to 18.5 million barrels.
Monday’s price gains indicated a belief among market players that the chances of OPEC members abiding by their new production limits were “a little better than 50-50,” said Andrew Lebow, an oil market analyst with E.D.&F.; Man International Futures Inc. in New York.
Platinum Up Sharply
“If you go back to 1987, during the first half of that year there was a general adherence to the quota,” Lebow said. “But as we know from the second half of this year, they have also had problems adhering to a quota.”
The prospect of higher oil prices triggered a rally in the inflation-sensitive precious metals markets Monday, but only platinum managed to hold sharp gains into the close.
Platinum settled $14.90 to $15.70 higher, with January at $586.70 an ounce.
On New York’s Commodity Exchange, which, like the New York Merc, was closed Thursday through Sunday for Thanksgiving, gold settled $3.10 to $3.80 higher, with December at $423.30 an ounce; silver settled 2 cents to 5.9 cents higher, with December at $6.115 an ounce.
Platinum’s move was more “realistic” than gold’s, said Richard Levine, an analyst with Elders Futures Inc. in New York, considering the firming of energy prices and the relatively tight warehouse stocks of both metals.
New York-based analyst James Steel of Refco Inc. said the dollar’s strength on Monday may have helped limit the gains in gold and silver.
But Levine said the dollar’s surge appeared to be a short-term reaction to the sudden rise in energy prices.
“I would look for the dollar to come off if this oil price holds and for gold to go higher,” he said.
Grain and soybean futures fell sharply on the Chicago Board of Trade on profit taking following the announcement of a new multiyear grain deal with the Soviet Union.
The grain markets had rallied strongly last week, including modest gains on Friday, in anticipation of a grain pact. Monday’s activity was a classic example of “buy the rumor, sell the fact,” analysts said.
Wheat Prices Drop
The 27-month extension signed in Moscow revived a five-year pact that expired Sept. 30, calling for the Soviet Union to buy at least 9 million metric tons of grain a year from the United States.
Wheat settled 2.5 to 7 cents lower, with December at $4.185 a bushel; corn was 3.75 to 7.75 cents lower, with December at $2.5725 a bushel; oats were 10 cents lower across the board, with December at $2.05 a bushel, and soybeans were 12.25 to 16.25 cents lower, with January at $7.495 a bushel.
Coffee futures plunged on New York’s Coffee, Sugar & Cocoa Exchange on weakening technical signals, analysts said.
Coffee settled 1.15 to 3.33 cents lower, with March at $1.2251 a pound.
