April 8, 2011

Oil, Gold Still Rising on Unrest, Inflation

Libya raises specter of long-term oil cuts; gold sets new record

Libyan oil fields under attack sent the cost of oil surging on Friday to a 32-month high above $124 as gold entered record territory yet once more.

Reuters reported that worries about lengthy disruptions to Libya’s oil supply teamed with an overall rise in the prices of commodities. That sent Brent crude up in morning European trading, rising $1.49 to $124.16 after briefly touching $124.45, where it had not been since August of 2008. U.S.crude rose $1.24 to $111.64, after checking in at an intraday level of $111.68; it had not been that high since September of 2008.

Christophe Barret, commodities analyst at Credit Agricole, was quoted in the report saying, "It looks like some of the fields in Libya are starting to be the target for military strikes which is worrisome because it means we have a risk of losing more crude for longer." Libya’s output has been cut by 80% by its conflict; it is now producing only 250,000-300,000 barrels per day. International Energy Agency data show that it took Kuwait two years to get back to its pre-Gulf War production levels, comparable to Libya, of 1.6 million barrels per day once hostilities ended.

Gold rode inflation concerns to a new high of $1,466.40 per ounce for spot, and looks likely to total up gains for the week at 1% with more increases to follow. U.S. gold futures for June hit $1,468 per ounce, setting a record. Silver followed gold’s rise to a level it had not seen since 1980, hitting $40 per ounce for spot, with gains of 6% for the week likely.

Pradeep Unni, senior analyst at Richcomm Global Services in Dubai, was quoted as saying, "Corrections [on gold prices] from here are likely to be shallow, with fresh investment demand emerging on all dips. $1,500 an ounce is around the corner and may be hit in the next few sessions." SPDR Gold Trust reported that its holdings increased to 1,217.209 tons by Thursday; that is the highest since mid-March. iShares Silver Trust also reported increased holdings, up to 11,192.80 tons on Thursday from 11,162.45 on April 4.

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