Commodities aim higher as Greece secures new bailout

22nd July 2011, Comments 0 comments

Commodity prices were mostly higher this week after Greece secured a second bailout package, dampening concerns that the eurozone debt crisis would sap global demand for raw materials.

Eurozone leaders and private creditors agreed on Thursday to give Greece a new 159-billion-euro ($229-billion) bailout, risking a potential default to prevent the debt crisis from spreading.

Markets struggled earlier as the eurozone debt crisis, which has already dragged down Ireland, Greece and Portugal, appeared to spread to Italy and Spain.

OIL: World oil prices climbed, with New York crude briefly spiking above $100 on Thursday in anticipation of the Greek debt and as the dollar weakened sharply.

The European single currency jumped to $1.4439 on Thursday in the wake of the deal but fell back slightly on Friday.

"The plan provided more measures to stimulate the Greek economy and to intervene to support other nations before a crisis might develop," Sucden analyst Brenda Sullivan said.

"For now the Greek-focused deal sees general market sentiment more positive as evidenced by the strength in the euro, equities and energy markets."

A weaker dollar tends to boost the price of oil which is sold in the US unit.

The new Greek bailout included 109 billion euros in loans from the European Union and International Monetary Fund and 50 billion euros of funding from the private sector.

"Energy markets seemed to wait almost all week for Thursday's Greek aid deal," Sullivan noted.

"Optimism Thursday over draft proposals suggesting a deal that could also help prevent debt-crisis contagion lifted sentiment and saw risk appetite improve.

"WTI futures broke above $100 per barrel for the first time since mid-June and Brent breached $119."

Prices also advanced this week on optimism that politicians in Washington would reach a deal to raise the US federal government's debt ceiling and avert a potentially catastrophic default, analysts said.

The White House has said it sees "momentum" toward a deal to avert a disastrous early August debt default but rejected reports that a compromise with top lawmakers may be imminent.

Time is running short before an August 2 deadline to raise the US government's $14.3-trillion official debt ceiling.

Separately, the International Energy Agency said on Thursday that it was "not now seeking the release of additional" stocks of oil from strategic reserves in oil-consuming countries.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in September stood at $118.53 a barrel, up from $117.25 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for September rose to $99.81 a barrel from $97.29 the previous week for the August contract.

PRECIOUS METALS: Gold chalked up strong gains, hitting a record $1,610.10 per ounce on Tuesday as the precious metal benefited from its safe haven status amid concern over the eurozone debt crisis.

Gold then eased somewhat following Thursday's eurozone summit debt deal for Greece.

However, gold remained firm after ratings agency Fitch said it would consider debt-stricken Greece to be in limited default under the terms of the new bailout.

"Gold and silver prices have continued to retain their firm tone despite the agreement in Brussels," CMC Markets analyst Michael Hewson said.

"Fitch's actions in placing Greece in 'restricted default' continue to highlight the problems within Europe and keep the precious metals prices underpinned."

By late Friday on the London Bullion Market, gold jumped to $1,602 an ounce from $1,587 the previous week.

Silver rallied to $39.67 an ounce from $38.17.

On the London Platinum and Palladium Market, platinum advanced to $1,793 an ounce from $1,760.

Palladium increased to $807 an ounce from $777.

BASE METALS: Base or industrial metals were mixed as traders monitored weak Chinese data and the latest Greek developments amid mixed signals over the US economic outlook and lingering supply tensions.

Manufacturing activity in China contracted for the first time in a year in July to hit a 28-month low, HSBC data showed Thursday, the latest sign tightening measures are impacting the economy.

HSBC's preliminary purchasing managers index for China fell to 48.9 in July from a final reading of 50.1 in June. The Asian giant is a huge consumer of raw materials.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months eased to $9,652 a tonne from $9,707 the previous week.

Three-month aluminium rose to $2,577 a tonne from $2,486.

Three-month lead slipped to $2,687 a tonne from $2,693.

Three-month tin rallied to $28,200 a tonne from $27,250.

Three-month zinc increased to $2,474 a tonne from $2,368.

Three-month nickel declined to $23,950 a tonne from $24,335.

COCOA: Prices retreated as traders were faced with the prospect of a rising supplies in top global producer Ivory Coast.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in September fell to £1,913 a tonne from £1,972 the previous week.

In New York on the NYBOT-ICE, cocoa for September decreased to $3,076 a tonne from $3,142.

COFFEE: Prices declined.

By Friday on NYBOT-ICE, Arabica for September dropped to 241.40 US cents a pound from 256 cents the previous week.

On LIFFE, Robusta for delivery in September retreated to $2,028 a tonne from $2,300.

SUGAR: Sugar traded mixed, one week after striking a 20-year high in London amid forecasts of an exceptionally poor harvest in Brazil.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October advanced to 31.34 US cents a pound from 28.95 cents the previous week.

On LIFFE, the price of a tonne of white sugar for October eased to £812.70, from £844 the previous week for the August contract.

GRAINS AND SOYA: Prices were mixed.

By Friday on the Chicago Board of Trade, maize for delivery in September declined to $6.84 a bushel from $6.94 a week earlier.

November-dated soyabean meal -- used in animal feed -- firmed to $13.90 a bushel from $13.87.

Wheat for September eased to $6.73 from $7.01.

RUBBER: Malaysian rubber prices rose on the back of strong overseas demand.

The Malaysian Rubber Board's benchmark SMR20 increased to 465.00 US cents per kilo from 455.80 US cents the previous week.

© 2011 AFP

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