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Crude prices down after Iran letter


by Elaine Frei
May 8, 2006

The price of crude oil fell significantly on Monday after the president of Iran sent a letter to US President George W. Bush asking that a solution be found to “the current situation in the world”, referring to the dispute over Iran‘s nuclear program. This unusual step led hedge funds to close out some of their speculative long positions, which caused oil prices to soar to record highs last week, according to a report from the Commodity Futures Trading Commission. Despite this latest development, however, the International Energy Agency expects prices to remain high for at least the next two or three years.

The price of West Texas Intermediate crude for June delivery dropped $1.50 to $68.69 per barrel on the New York Mercantile Exchange. June contracts for Brent crude on the International Petroleum Exchange were down $1.46 to $69.44 per barrel.

In the precious metals markets, gold was driven up and down, then up again in reaction to the drop in the price of oil as well as in response to current conditions in the currency markets. Gold was as high as $684.70 per troy ounce and as low as $670 per troy ounce before settling in at $676.80 per troy ounce. Silver was down 1.4 percent to $13.75 per troy ounce, while platinum added 0.4 percent to $1,183 per troy ounce after going as high as $1,089 earlier in the day.

In base metals, copper dropped 0.2 percent to $7,640 per tonne on an increase of 1,800 tonnes in London Metal Exchange inventories. Supply concerns were also eased by the news that a strike at the Lomas Bayas mine in Chile had been called off. Nickel was slightly lower at $19,450 per tonne and zinc dropped 1.7 percent to $3,390 per tonne. Both copper and zinc had hit new record highs on Friday.



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