Copper forges fresh record; oil strikes two-year peaks

24th December 2010, Comments 0 comments

In a fast-moving week for commodities, copper rocketed to a new record high, coffee and sugar hit impressive multi-year peaks and crude oil struck two-year pinnacles before the Christmas break.

Copper was spurred higher by Chinese demand and a strike in key producer Chile, while coffee and sugar were supported by keen demand and scarce supplies.

Oil prices meanwhile vaulted to levels last seen in October 2008 on the back of freezing weather in Europe and North America, the weak dollar and positive US economic indicators.

And the cocoa market extended gains as traders worried about escalating violence in top producer Ivory Coast in the wake of disputed presidential elections.

Some markets experienced holiday-shortened trade this week owing to a Christmas Eve holiday on Friday.

BASE METALS: Copper prices surged to a record 9,392 dollars per tonne on Tuesday on the back of upbeat Chinese data and after a key Chilean mine halted its exports.

"Copper has continued to rise this morning on supportive Chinese trade data and news that Collahuasi had called force majeure on concentrate shipments," said Barclays Capital analysts in a note to clients.

"The full and final data set for Chinese base metals November trade data paints an encouraging picture. Imports of all the metals increased -- apart from nickel -- with the rise in copper and tin particularly noteworthy."

Chile's massive Collahuasi copper mine on Monday suspended exports following a ship-loading crane accident that killed three workers at the port where its concentrate is shipped.

"Collahuasi has declared a force majeure on its contracts of copper concentrate," said mine spokeswoman Bernardita Fernandez, using the phrase for a contract suspension due to circumstances beyond a firm's control.

The world's third largest copper mine produces around three percent of global supplies and is located near the city of Iquique, in far northern Chile.

Meanwhile, a mystery buyer has snapped up 90 percent of the copper on the London Metal Exchange (LME) amid sky-high prices for the industrial metal that is used in plumbing, heating, electrical and telecommunications wiring.

"Dominant long positions are not unusual and the LME has proven processes for dealing with these positions," said Diarmuid O'Hegarty, LME head of regulation and compliance.

He added that the LME had "strict rules" that would require traders to lend back to the market at pre-agreed rates.

By late Friday on the LME, copper for delivery in three months rallied to 9,339.50 dollars a tonne from 9,081 dollars a week earlier.

Three-month aluminium climbed to 2,446 dollars a tonne from 2,337.25 dollars.

Three-month lead grew to 2,448 dollars a tonne from 2,426 dollars.

Three-month tin increased to 26,650 dollars a tonne from 26,075 dollars a week earlier.

Three-month zinc increased to 2,314 dollars a tonne from 2,280 dollars.

Three-month nickel slid to 23,900 dollars a tonne from 24,900 dollars.

OIL: Prices hit a 26-month peak, lifted by freezing weather and upbeat US data, before running into modest profit-taking before the festive break.

London Brent North Sea crude for February delivery soared to 94.74 dollars per barrel -- the highest point since October 2008 -- while New York's light sweet crude struck a similar peak at 91.63.

"As we are approaching the year-end, the recent rally in crude oil prices shows the underlying strength in the oil market," said Sucden analyst Myrto Sokou.

"Overall, it seems that there is a strong outlook for the oil market, as crude oil prices continue strongly their upside momentum and hold strong support above the 90-dollars-per-barrel area."

This week, icy weather across Europe and northeastern US states -- which forecasters said would last until the end of the year -- lifted prices because it boosts demand for heating oil.

The market also spiked higher following Wednesday's news of plunging US crude reserves as demand in the world's biggest oil-consumer rises.

US crude stocks slumped 5.3 million barrels in the week to December 17, more than double market expectations for a drop of 2.3 million barrels, reflecting strengthening demand in the world's biggest economy.

"Cold weather in Europe has increased demand for distillate fuel, and we have seen good demand here in the US too, due to cold weather," said Andy Lipow of Lipow Oil Associates.

"World oil demand is increasing and in the short term the cold weather is contributing to that," he said.

A slew of economic data released on Thursday in the United States showed a stabilisation of jobless claims, an improvement in the housing market and a rise in consumer spending, further bolstering trade.

The market was also pushed higher by impressive oil consumption data from China.

Prices found further support from the weaker dollar, which makes dollar-priced oil cheaper for buyers using stronger currencies. In turn, that tends to stimulate demand and prices.

By Friday afternoon on London's Intercontinental Exchange, Brent North Sea crude for delivery in February soared to 93.46 dollars a barrel compared with 91.78 dollars a week earlier.

By Thursday on the New York Mercantile Exchange, Texas light sweet crude for February had jumped to 91.51 dollars a barrel, from 88.01 dollars for the now-expired January contract on Friday of the previous week.

COCOA: The market rallied as a result of ongoing violence in Ivory Coast.

West African leaders held emergency talks Friday on the crisis in Ivory Coast with the United States searching for more UN troops and France offering Laurent Gbagbo a final chance to step aside.

The summit came after a UN body demanded a halt to "atrocities" in Ivory Coast and the Central Bank of West African States blocked Gbagbo's access to finances, putting a further squeeze on his bid to remain in power.

Much of the world, including the United Nations, has recognised Gbagbo's rival Alassane Ouattara as the winner of last month's elections, but the strongman has refused to budge in the face of mounting calls for him to leave.

"The political crisis in Ivory Coast is escalating," said commodity analysts at Commerzbank.

"The outbreaks of violence in the past few days are fuelling fears of another civil war.

"This uncertainty in the world's largest cocoa producer has already resulted in interruptions to cocoa shipments. We therefore expect cocoa prices to climb."

By Friday on LIFFE, London's futures exchange, cocoa for March rose to 2,022 pounds a tonne from 1,975 pounds a week earlier.

By Thursday on the New York Board of Trade (NYBOT), cocoa for delivery in March climbed to 3,020 dollars a tonne from 2,965 dollars.

PRECIOUS METALS: Gold crept towards its recent record high pinnacle.

"The price of gold should continue to be supported by demand for a safe haven from other potential economic and financial shocks," said Capital Economics analyst Julian Jessop.

"Front-runners include the risks of a US-China trade war and some form of EMU break-up.

"Even if the eurozone holds together, the rolling financial crisis in Europe should keep investors nervous," he warned.

Gold had soared to a record high of 1,431.25 dollars an ounce earlier this month thanks to fears over the eurozone debt and deficit crisis.

By late Friday on the London Bullion Market, gold advanced to 1,380.50 dollars an ounce at the late fixing from 1,368.50 dollars a week earlier.

Silver rose to 29.07 dollars an ounce from 28.78 dollars.

On the London Platinum and Palladium Market, platinum increased to 1,725 dollars an ounce from 1,696 dollars.

Palladium gained to 764 dollars an ounce from 738 dollars.

COFFEE: Coffee soared to a fresh 13-year high at 242.25 cents per pound in New York, driven by concerns over stretched global supplies.

"The scarcity of Arabica beans and investor interest in coffee are still driving prices up," added Commerzbank analysts.

By Friday on NYBOT, Arabica for delivery March increased to 235.90 cents a pound from 219.35 cents the previous week.

On LIFFE, Robusta for March leapt to 1,998 dollars a tonne from 1,974 dollars.

GRAINS AND SOYA: Soya, maize and wheat prices rose across the board.

By Thursday on the Chicago Board of Trade, March-dated soyabean meal -- used in animal feed -- climbed to 13.60 dollars a bushel from 13.10 dollars on Friday of the previous week.

Maize for delivery in March gained to 6.14 dollars a bushel from 5.96 dollars.

Wheat for March increased to 7.83 dollars from 7.56 dollars.

SUGAR: Sugar futures zoomed to their highest level for 30 years, on the back of rampant demand from Asia and fears about weak global supplies.

Sugar rocketed as high as 34.06 US cents per pound in New York on Thursday, reaching a level last seen in January 1981.

By Thursday on NYBOT, the price of unrefined sugar for delivery in March advanced to 33.98 US cents a pound compared with 31.56 cents for the March contract on Friday of the previous week.

By Friday, On LIFFE, the price of a tonne of white sugar for March jumped to 820 pounds from 778.90 pounds a week earlier.

RUBBER: Malaysian rubber prices rallied to another historic high, extending its recent record-breaking run, on the back of rising demand and tight supplies, dealers said.

The Malaysian Rubber Board's benchmark SMR20 rose to 487.55 US cents per kilo, from 457.50 cents last week.


© 2010 AFP

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