Oil rises but base metals retreat

Oil prices rose on Monday amid concern about possible disruption to production in the Gulf of Mexico by Hurricane Felix while further support was provided by growing expectations that the Organisation of the Petroleum Exporting Countries will keep output quotas unchanged at its meeting next week.
ICE October Brent rose 64 cents to $73.33 a barrel while Nymex October West Texas Intermediate added 44 cents at $74.48 a barrel.
Trading volumes across commodity markets were thinner than normal due to yesterday’s US public holiday and dealers also noted reluctance to open new positions ahead of vital US economic data this week.
Analysts at Citigroup said during the current credit crisis, investors had not aggressively sold their commodity positions and did not appear poised to do so.
“Commodity prices have fallen no more than other asset classes,” said Alan Heap of Citigroup. “The fundamentals of commodity markets remain robust, and even if the US tips into a mild recession, the impact will be benign, thanks to China.”
The Baltic Dry Index, a gauge of global shipping costs, hit a record of 7,783, up 1 per cent. Sea freight costs have surged as the world fleet struggles to match demand. Merchant ships in the Atlantic are reported to be charging day rates of $125,000 for a year-long charter.
Copper fell 1.5 per cent to $7,385 a tonne amid reports that a ship carrying as much as 40,000 tonnes of the red metal had arrived in Shanghai, raising concerns that spot demand in China could be overwhelmed by the increase in supply. However, traders said the entire cargo was unlikely to be unloaded and noted that China imports around 120,000 tonnes of copper a month.
Nickel was almost unchanged at $29,835 a tonne, amid mounting evidence that the Asian stainless steel market is stabilising. A number of Asian steelmakers have said they will cut production and raise prices, supporting nickel.
Tin slipped 2.1 per cent to $15,150 a tonne supported by a fall of 185 tonnes in LME stocks, a fifth successive day of outflows.
Aluminium fell 2.4 per cent to $2,490 a tonne after a large increase of 12,900 tonnes in LME stocks.
Zinc retreated 2.4 per cent at $3,035 a tonne while lead lost 2.8 per cent at $3,025 a tonne.
The global primary aluminium market recorded a supply deficit of 70,000 tonnes in the first half of this year, due mainly to a significant increase in Chinese demand, according to the World Bureau of Metal Statistics. Global consumption was estimated at 18.44m tonnes in the first half of 2007, up by just over 10 per cent compared to the same period last year. Chinese demand is estimated to have risen by 46 per cent but European demand was also robust, increasing by 6 per cent. Global production rose by 11.6 per cent to 11.37m tonnes with China now accounting for almost one-third of world output.
Gold eased 1 per cent to $671.90 a troy ounce after rallying