Oil and Gold Investing

Light, sweet crude for Octo­ber delivery rose 52 cents to set­tle at $115.11 a barrel on the New York Mercantile Exchange after earlier falling as low as $113.68. Trading was light heading into the Labour Day holiday now a week away, adding to the volatil­ity that has characterized the market in recent days, includ­ing a $12 price swing between Thursday and Friday.

At the pump in the United States, a gallon of regular gaso­line shed almost a penny over­night to a national average of $3.681, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices have dropped 15 cents a gallon in the last two weeks, according to the Lundb­erg Survey of 7,000 gas stations nationwide.

In Canada, the price averaged C$1.30066 per litre, according to price-watching website Gas­buddy.

com Crude traded erratically most of the day in lockstep with a wa­vering U.S. dollar, which has be­come the focal point for inves­tors trying to figure out whether crude is going higher or lower. The greenback gained ground against the euro earlier Mon­day, fell back, then gained again in a span of a few hours.

A stronger U.S. dollar typical­ly makes oil less attractive to in­vestors who buy commodities as a hedge against inflation and weakness in the U.S. currency. But prices were supported by fears that Gustav could threaten oil and natural gas production in the Gulf of Mexico. The storm was heading for the Dominican Republic and Haiti with maxi­mum sustained winds of near 100 kilometres per hour.

“The dollar wants to pull oil lower and the storm wants to pull it higher. It’s a bit of a tug-of­war right now," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

“We continue to see little chance for oil to be used by Rus­sia as a bargaining tool," said Olivier Jakob of Petromatrix in Switzerland. “Oil is the weapon of last resort, not of first resort . . . and it would make no sense for Russia to limit exports of crude or products to European countries."

In other Nymex trading, heat­ing oil futures rose 2.57 cents to $3.1568 a gallon, while gasoline prices rose 1.59 cents to $2.8845 a gallon. Natural gas futures fell 3.3 cents to $7.81 per 1,000 cubic feet.

In London, October Brent crude rose 33 cents to $114.25 on the ICE Futures exchange.

Oil’s uncertainty Monday fol­lowed a round of hyper-volatile trading last week. On Friday, crude fell US$6.59, or 5.4 per cent, to $114.59 a barrel. It was crude’s largest single-day price drop in percentage terms since Dec. 27, 2004.

That decline wiped out gains from an almost $6 ral­ly on Thursday. Analysts said the market’s inability to rally in the face of bullish news such as threats to energy supplies from a conflict between Russia and Georgia and another tropical stor m suggests that crude re­mains in a downward trend. Crude oil has dropped about $30, or 25 per cent, from record trad­ing levels above $147 a barrel reached last month.

“From the Caribbean to the Caspian, we’ve had one bullish headline after another and the market cannot generate a (sus­tained) rally," said Stephen Schork, an analyst and oil trad­er in Villanova, Pa. “It certainly doesn’t bode well for anyone who owns commodities."

Still, unresolved tensions be­tween the U.S. and Russia over the conflict in Georgia could re­kindle supply worries and send prices higher.

Russia pulled the bulk of its troops and tanks out Friday un­der a ceasefire agreement, but built up its forces in and around South Ossetia and Abkhazia, both separatist regions.

A U.S. navy destroyer loaded with humanitarian aid reached Georgia’s Black Sea port of Ba­tumi on Sunday, a development that a Russian general suggest­ed would worsen tensions be­tween the former Cold War foes. A Monday vote by Russian lawmakers unanimously ask­ing President Dmitry Medvedev to recognize the independence of Georgia’s two rebel provinces added to the concerns of energy markets.

Despite the conflict, some analysts said energy flows from Russia to the West were safe.

Oil prices closed at their lowest level in five months as a lower-than-expected drop in US gasoline stockpiles gave traders more reason to believe that a cooling economy is forcing Americans to drive less.

Light, sweet crude for October delivery fell $US1.46 to settle at $US107.89 a barrel on the New York Mercantile Exchange. It was the lowest settlement price for a front-month contract since April 4.

In London, October Brent crude fell $US1.76 to settle at $US106.30 a barrel on the ICE Futures exchange.

Crude prices have fallen for five straight sessions, extending an almost two-month slide as traders shift their attention away from supply-threatening storms and back toward a stronger dollar and evidence of falling demand.

In its weekly inventory report, the Energy Department's EIA said US gasoline stocks fell by one million barrels to 194.4 million barrels for the week ending August 29, less than the 1.8 million-barrel drop analysts surveyed by energy research firm had Platts expected.

In other Nymex trading, heating oil futures fell 5.51 cents to settle at $US3.0237 a gallon, while gasoline futures fell 2.64 cents to settle at $US2.7404 a gallon. Natural gas futures rose 5.8 cents to settle at $US7.322 per 1,000 cubic feet.

COMEX

Gold fell for the fourth straight day as the euro weakened against the dollar, eroding the appeal of the precious metal as an alternative investment. Silver was little changed.

Gold futures for December delivery fell $US5, or 0.6 per cent, to $US803.20 an ounce on the Comex division of the New York Mercantile Exchange. The metal has dropped 4.1 per cent since August 28.

Silver futures for December delivery fell 0.7 cent to $US12.94 an ounce on the Comex. Silver has fallen 13 per cent this year, while gold dropped 4.2 per cent.

The euro fell as much as 1.2 per cent against the dollar after the European Central Bank kept the benchmark rate at a seven-year high and said risks to growth remain. Gold reached a record in March as the euro headed toward an all-time high in July.

CHANGCHUN, Sept. 5 (Xinhua) -- Concern over surging oil prices could mean the restructuring and upgrading of China's industries, according to a United Nations Conference on Trade and Development (UNCTAD) official here on Friday.

"Commodity price hikes have severely affected the Chinese economy, but they also occurred as China faces industrial restructuring challenges," Li Yuefen, the UNCTAD Debt and Development Finance Branch head, said.

Rising commodity prices and wages have made it increasingly difficult for China to sustain a competitive export edge, she added.

A slow global economy is another challenge.

The Geneva-based agency released its annual Trade and Development Report (TDR) in Changchun, the northeastern Jilin Province capital. The world economy is forecast to grow 2.9 percent this year, 0.9 percentage point less than last year, according to the report.

"In mid-2008, the global economy is teetering on the brink of recession," Li said. The downturn after four years of relatively fast growth was due to a number of factors.

These included the ongoing financial crisis, high commodity prices and tight monetary policies in several countries. China also faced a weak and volatile stock market.

Despite a slowdown, output growth in China this year was expected to expand about 10 percent, said Detlef Kotte, an UNCTAD Macroeconomic and Development Policies Branch official. That growth is dependent on oil prices and might lead policy makers to restructure Chinese industries.

Li recommended cutting oil use and upgrading manufacturing technology.

The full TDR report is at www.unctad.org.

The report's release took place amid the 4th Northeast Asia Investment and Trade Expo here.

Nobel economics prize winner Robert Mundell told a forum that China's economic growth would not stay at 11 percent for long, but it was destined to be 8 percent for the next 15 to 20 years.

China's GDP growth rate was 11.4 percent last year. GDP grew by10.4 percent in the first half, down 1.8 percentage points year-on-year.

Mundell predicted that China's GDP would overtake that of Japan by 2012, surpass Europe in 2030 and exceed that of the United States in 2050.

Asked about the economic impact of the Olympics, Kotte said it would be reflected in a boost from infrastructure projects. There would not be a post-Olympics slowdown as some infrastructure projects were still under way and China was a large economy, Kotte added.

He said the Games would "also help foster a positive image" of China around the world, which would attract investment and tourism.