Tropical storms fuel rally in crude oil prices

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Commodities prices were mixed Wednesday with energy products moving sharply higher while base metals continued to be dragged down by the credit turmoil.

Crude oil prices rallied on fears of two tropical storms heading to the oil-rich Gulf of Mexico and news of a larger-than-expected fall in US crude oil inventories.

Nymex September West Texas Intermediate rose $1.77 to $74.15 a barrel while ICE September Brent rose $1.67 to $72.18 a barrel.

The rise came as data showed US crude oil inventories last week fell 5.4m barrels, more than double analysts’ forecasts, to 335.2m barrels. Crude oil inventories at the market-sensitive town of Cushing, the delivery point of the Nymex contract, fell 0.9m barrels, to the lowest level since December 2005.

Oil traders were watching the tropical storm Erin in the Gulf of Mexico and the stronger tropical storm Dean in the Atlantic. Dean might become a hurricane in two days as it heads to the Gulf of Mexico, home of about a third of US oil and gas production and the bulk of its refinery capacity, the US National Hurricane Centre said.

Base metals prices dropped for a second day, amid fear of slowing demand. London Metal Exchange tin fell 3.2 per cent to $13,725 a tonne. Tin prices have fallen about 17 per cent in the past four trading days.

Gold was flat at $668.2 an ounce in spite of strong demand for the precious metal. Gold consumption in the second quarter jumped 19 per cent more than a year earlier, according to the industry-funded World Gold Council. “The economy was strong in key markets, such as India, China and the Middle East, and prices were less volatile,” Jill Leyland, WGC economic advisor said.

Wheat prices rose in early trading above $7.00 a bushel for the first time since 1996 but CBOT September wheat later traded 2 cents up at $6.94½ a bushel.

The Baltic Dry Index rose to an all-time high of 7,231 points, up 1.2 per cent on the day on robust demand for bulk commodities, such as iron ore, port congestion and longer trade routes.

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