Hurdles ahead for oil while gold holds steady

OIL prices remained challenged by concerns about the strength of the economic recovery.

While global stocks have been on the rise since the beginning of this year, the US Labour Department reported new jobless claims rose by 11,000 last week, higher than market expectations of a 4000 drop while US December retail sales figures also fell unexpectedly despite the peak holiday shopping season.

"It's getting more and more difficult to maintain prices at around $US80, though last week it seemed like it was going to be the floor," MF Global vice president of energy Michael Fitzpatrick told Bloomberg.

Further pressure was placed on prices after the Energy Information Administration's weekly US crude inventory report showed that despite the recent icy weather in the US, distillate stocks - including heating oil and diesel - increased by 1.35 million barrels of oil.

Crude inventories were also up 3.7MMbbl while gasoline inventories rose 3.8MMbbl.

"The last few weeks of draw-downs had people optimistic that we were going to start to see this big supply overhang worked off, but it doesn't seem to be the case," National Australia Bank minerals and energy economist Ben Westmore said.

Singapore's Tapis crude slipped from $US82.37 per barrel on Wednesday to $US82.24 last night.

Meanwhile, gold remained steady this week with spot gold trading at $1151.70 per ounce on Monday, compared with $1139.70/oz today, with Comex gold following the same pattern.

Copper remained steady after reaching a 16-month high of $7630.50 per tonne in the middle of last week.

London Metal Exchange copper closed at $7465.75/t overnight.

In company news, Eldore Mining signed a farm-in agreement with Pacific Niugini (formerly Chrome Corporation) over the Mt Hagen project in the Western Highlands Province.

Under the deal, Eldore will have the right to earn 60% in the project by spending $A2 million on exploration at the project, which is thought to be prospective for copper, gold, molybdenum and base metals.

Both companies shares were boosted by the news.

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