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[Bullwinkle]

Deutsche Bank Says Commodities Prices to Rise in 2005


Jan. 7 (Bloomberg) -- Deutsche Bank AG, Europe's third- largest bank by assets, is maintaining a ``bullish outlook' for most commodities prices in 2005 as the dollar weakens and oil supplies face threats in the Middle East and Russia.

``Iraqi elections, policy chaos in Russia, Iran's nuclear plans and Chinese demand' will keep oil prices high, Michael Lewis, Deutsche Bank head of commodities research in London, said in a report today. Gold aluminum, copper and zinc will set new multiyear highs, and corn and wheat may rebound, he said.

``Since investors tend to be overly optimistic about asset markets which have been past winners and overly pessimistic about past losers, we are positioning for a new wave of risk capital to enter the complex this year,' Lewis said.

Crude oil for February delivery fell 19 cents, or 0.4 percent, to $45.37 a barrel on the New York Mercantile Exchange as of 1:23 p.m. in London. Prices reached a record $55.67 on Oct. 25.

Sabotage, Yukos

Oil shipments from Iraq, holder of the world's third-largest reserves, have been reduced by an upsurge in violence as the country prepares for elections on Jan. 30. Russia, the world's No. 2 oil exporter, broke up its second-biggest oil producer, OAO Yukos Oil Co., last year to reclaim unpaid taxes.

``Oil-directed sabotage both ahead of, and after, the election could have a significant impact on Iraq's production,' Lewis said. ``The uncertainties surrounding Yukos and the oil business in Russia could have important implications.'

Iran, holder of the world's second-largest oil reserves, negotiated with diplomats from France, Germany and the U.K. for more than a year before agreeing Nov. 29 to stop uranium conversion. U.S. President George W. Bush had said he was concerned Iran was accelerating efforts to build nuclear weapons.

``The worry is that the U.S. might take military action,' Lewis said. ``Iranian politicians have said if their nuclear facilities are attacked they will retaliate. Such an event would have incalculable implications for the oil markets.'

China's Growth

China's economy grew at a 9.1 percent annual pace in the third quarter, outpacing growth of 4 percent in the U.S. and 1.8 percent in Europe. China is the world's largest copper buyer, second-biggest oil user, and the third-largest consumer of gold jewelry.

``We are forecasting Chinese GDP and industrial production growth to rise this year,' Lewis said. ``This will lead to a further increase in the share of Chinese commodity consumption as a proportion of the world.'

Gold for immediate delivery in London fell 4 cents to $421.36 an ounce. It reached a 16-year high of $456.89 on Dec. 2. Deutsche Bank's target price for 2005 is $480.

Dollar-denominated gold tends to rise as the U.S. currency drops, making it more attractive as an alternative investment and cheaper for holders of other currencies. The dollar, at $1.3191 per euro as of 1:23 p.m. in London, will drop to $1.50 by the end of 2006, Deutsche Bank predicted.

Copper Prices

Copper for delivery in three months rose $23, or 0.8 percent, to $2,975 a metric ton on the London Metal Exchange. It reached a 16-year high of $3,179.50 on Oct. 11.

Aluminum for delivery in three months rose $9, or 0.5 percent, to $1,816 a ton. It reached $1,972 on Dec. 31, the highest since 1995. Zinc for delivery in three months advanced $10, or 0.8 percent, to $1,217 a ton. The contract reached $1,262 on Dec. 30, the highest since 1997.

Deutsche Bank's target prices for copper, aluminum and zinc are $3,350, $2,250 and $1,400 respectively, the report said.

Wheat for May delivery rose 0.5 percent to 67.45 pounds ($127) a ton on the London International Financial Futures and Options Exchange. It has fallen 26 percent in the past 12 months.

Corn for December delivery rose 0.25 cent to $2.0875 a bushel on the Chicago Board Trade. Prices touched a 31-month low of $1.955 on Nov. 12.

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