Oil prices suffered falls of more than 6 per cent this week in spite of a modest rally on Friday.

The fall in oil prices were largely a reflection of the warmer-than-expected winter in the US and Europe, which has reduced the demand for winter fuel oil. A further increase in US petroleum product inventories amid falling demand for heating oil also hit prices.

ICE Brent for February delivery gained 61 cents to $52.31 a barrel in late afternoon London trade. The benchmark Brent contract has dropped about six per cent over the week and touched a 19-month low of $51.65 on Thursday, and slid 14 per cent so far this year.

The US oil futures benchmark, the West Texas Intermediate added 33 cents to $52.21 a barrel, but has dropped 7.2 per cent on the week and 14.5 per cent on the year.

The fall in oil prices has been accompanied by record trading volumes in both Brent and WTI, easing fears some investors might be exiting from market. The number of futures contracts held by investors and oil industry participants has not dropped.

The fall in oil prices has also surprised members of the Organisation of the Petroleum Exporting Countries as the oil price is at levels that are below their comfort zone. Analysts said all of the oil cartel’s production cuts announced last month had yet to come into effect, which made Opec reluctant to make trim output any further.

There also was a weak start to trading this week in metals and agricultural markets. However, there were strong rebounds as the week progressed.

US corn futures rose to a 10-year high of $3.9650 a bushel after the US Department of Agriculture revised down its estimate of US corn stockpiles at the end of the year to 752m bushels, which equates to a three-week supply. The previous estimate had been 935m bushels.

The lower inventory figure followed a cut in the USDA estimate for US corn production by 210m bushels to 10,535m. The combination of lower corn output and an expected increase in corn demand from the ethanol industry helped push corn prices to their highest level in a decade.

Wheat futures on the Chicago Board of Trade rose 28 cents or six per cent to $4.85 a bushel after the latest USDA monthly report showed that global wheat stockpiles would remain around 10 year lows.

Base metal prices, which started the year with steep falls, recovered some of their losses this week.

The three-month copper price fell $135 to $5,760 a tonne on the London Metal Exchange, but gained 2.6 per cent up on the week.

Nickel prices went close to touching a record high on Thursday, but fell $750 to $32,750 a tonne yesterday, steady on the week.

Gold prices added $12 yesterday despite a steady dollar. Traders said the rise was reflected technical buying. Gold was quoted at $624.30/$625.50 a troy ounce, up from the late quote of $611.30/$612.30 in New York on Thursday.

Bullion rose three per cent on the week, but is still below the start of the year level of $636.

Silver prices were also up strongly up 45 cents to $12.77.
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