Commodity markets were rangebound in light trading on Monday as investors looked ahead to this week’s Federal Reserve meeting when the outlook for US interest rates and growth should become clearer.

IPE August Brent moved 1 cent higher to $69.94 a barrel while Nymex August West Texas Intermediate added 18 cents to $71.05 a barrel.

Iran’s threat over the weekend that it was prepared to use oil as a weapon in any confrontation with the West over its nuclear enrichment programme provided some support for energy prices.

The impact was limited because hedge funds have significantly reduced their long speculative positions in crude. The Commodity Futures Trading Commission reported a further decline in long positions last week.

Iraq’s oil minister said the country’s output could rival Saudi Arabia’s within a decade after daily production reached 2.5m barrels in May, starting to recover from its post-war collapse.

Oil demand in China continued to grow strongly in May with a 13.5 per cent year-on-year increase. Refiners have increased output and cut exports ahead of a domestic price increase to meet peak summer demand.

Price action for precious metals was muted as many investors attended a conference in Switzerland organised by the London Bullion Market Association.

Gold edged 0.7 per cent lower to $579.15 a troy ounce and dealers said a period of sideways trading was likely with bullion balanced between inflation fears and growth concerns.

Silver fell 1.8 per cent to $10.11 a troy ounce while platinum rose 1.4 per cent to $1,182 a troy ounce and palladium gained 3 per cent at $310 az troy ounce.

The $40bn takeover of the two Canadian miners Inco and Falconbridge by US rival Phelps Dodge underlined industry confidence that metals prices will stay strong.

Copper rose 2.3 per cent to 6,937.5 a tonne in late trading in London. However, dealers said that some Chinese buyers were waiting to see how prices developed after the recent pull back in the market.

Global copper mine capacity over is forecast to grow at 4.3 per cent a year until 2009, exceeding the expansion of smelter capacity, according to the International Copper Study Group. The ICSG said annual mine capacity was expected to reach 19.6m tonnes in 2009, a total increase of about 3m tonnes or 18 per cent from 2005.

Nickel increased 2.7 per cent to $19,775 a tonne supported by a 750 tonne decline in London Metal Exchange stocks to 11,800 tonnes.

Zinc rose 4.2 per cent to $2,980 a tonne.

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