The devastating earthquake and tsunami in Japan will temporarily take pressure off of tightening global oil supplies, as the world's third-largest oil consumer works to rebuild its shaken economy, energy analysts said Monday.
But the disaster won't curb its energy appetite for long. Analysts say Japan will likely boost imports of diesel, natural gas and other refined fuels in coming weeks.
Benchmark West Texas Intermediate for April delivery rose three cents to $US101.19 per barrel on the New York Mercantile Exchange. Earlier it dropped below $US99.
In London Brent crude lost 13 cents at $US113.71 a barrel on the ICE Futures exchange.
Oil prices had been surging in recent weeks because of separate events on the other side of Asia and in North Africa. The squeeze on world supplies and concern that uprising could spread across the Middle East helped push oil prices about 24 per cent higher in the past few weeks.
Friday's earthquake and tsunami in Japan pulled markets in the opposite direction. Japan imports and consumes about 4.4 million barrels of oil per day. Analysts say at least some of that will be reduced as steel plants, auto manufacturers and three of five major oil refineries shut down.
Analysts think Japan will compensate for the shutdown of nuclear power plants by running generators on other fuels..
Japan's trade minister said Monday that the government will release enough oil from the country's reserves to cover three days of demand, according to Platts, the energy information arm of McGraw-Hill Cos.
Japan imports most of its oil from Saudi Arabia and the United Arab Emirates. It gets most of its LNG from Indonesia, Malaysia, and Australia. Analysts say Japan will try to tap those sources for more oil and LNG, and it will look to the US and India for more refined fuels like diesel.
Gold prices rose on Monday, as a nuclear crisis in Japan and heightened political unrest across the Arab world triggered safe-haven buying.
Platinum group metals fell more than one per cent as demand expectations took a hit after Japan's devastating earthquake and tsunami, which forced plant closures and production outages in the country's powerful auto industry.
Gold benefited from heightened uncertainty as Japan scrambled to avert a meltdown at a stricken nuclear plant on Monday after a hydrogen explosion at one reactor and exposure of fuel rods at another.
Political tensions flared across Middle East in North Africa after Saudi Arabia sent troops into Bahrain on Monday to help put down weeks of protests by the Shi'ite Muslim majority, and as fighting intensified between Muammar Gaddafi and Libyan rebels. Growing unrest was also reported in Yemen.
Gold hit a high $1,431.89 an ounce, within sight of the record $1,444.40 it hit last week. It gained 0.6 per cent to $1,425.86 an ounce by 12:31 pm EDT (1631 GMT).
US gold futures for April delivery rose 0.3 per cent to $1,426.60.
World stocks fell to six-week lows on Monday on fears over the global economic impact from Japan's disaster, and that helped lift gold.
Japanese stocks posted their biggest daily decline since October 2008 in record volume as investors speculated on economic losses. Potential fluctuations in the FX market also prompted investors to seek a shelter in gold.
Silver largely tracked gold to rise 0.1 per cent to $35.87 an ounce.
Platinum slid 1.4 per cent to $1,753.99 an ounce, and palladium lost 1.6 per cent to $744.72.
Copper prices bounced from near three-month lows to end flat on Monday, but sentiment remained fragile amid concerns over the global economic impact from Japan's devastating earthquake and tsunami.
Despite copper's ability to stabilise from the recent wave of risk reduction, investors continued to side with caution, fearing the crisis in Japan, the world's third largest economy, could derail the global economic recovery.
London Metal Exchange copper for three-month delivery eked out a $5 gain to close at $9,195 a tonne, extending a recovery from Friday's three-month low at $8,992 a tonne.
London's positive tone, however, failed to attract buyers in New York, where May copper fell 2.10 cents to finish at $4.1865 per lb.
Copper exports from top producer Chile are unlikely to suffer from Japan's disaster, as tight global supply means shipments can easily be rerouted to alternative markets.
Even if buyers in Japan are forced to declare force majeure after Friday's quake, which shut down smelters in the hardest-hit zones, top consumer China can absorb the slack.
In the longer term, reconstruction efforts in Japan were expected to spur greater demand for industrial metals.
Japan produced about 1.52 million tonnes of copper last year, about 7 per cent of global output. The smelters that produce this copper have shut operations because of power outages.
Adding to the negative demand outlook was data from China showing money growth and bank lending slowed sharply in February due to tighter monetary policy to rein in inflation.
In the meantime, premiums for physical copper in Europe held at two-year lows of $40 a tonne this week, about half the value of levels recorded in January, as traders said high prices deterred interest from China.
In other metals, three-month aluminium ended up $10 at $2,555 a tonne, zinc rose $54 to $2,330, and lead climbed $95 to $2,520, while nickel shed $245 to $25,850 a tonne.
Tin closed up $400 at $29,900 per tonne, supported by declining exports from Indonesia.
Indonesia's refined tin exports fell nearly 12 per cent in February from a year earlier as rains hampered mining, trade ministry data showed.
Palladium and platinum prices fell on Monday after some Japanese automakers suspended operations following the earthquake and tsunami.
Toyota Motor Corp, Nissan Motor Co and Honda Motor Co temporarily stopped production at their auto plants in Japan. The area hit by Friday's earthquake is a major centre for car production.
Investors are concerned that the closures will reduce demand for platinum and palladium, which are key metals used in manufacturing car catalytic converters.
CPM Group analyst Carlos Sanchez said demand will diminish for both metals, at least in the short term.
He cited robust demand for the metals in emerging markets, particularly China, and improved demand as economies grow stronger in Europe and the US.
Platinum for April delivery fell $29.40, or 1.7 per cent, to settle at $1,752.30 an ounce and June palladium lost $17.30, or 2.3 per cent, to settle at $748.20 an ounce.
Another factor that continues to weigh on metals used in manufacturing is persistently high oil prices, Sanchez said. Traders are worried that oil prices at $100 a barrel or higher will bring a slowdown in global manufacturing.