Oil flirts with $100 on strong US growth data, Egypt unrest

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World oil prices rallied close to $100 per barrel on Friday, as traders absorbed impressive fourth-quarter US economic growth and fretted over worsening political turmoil in Egypt.

Most other commodity markets also won support this week from news that the US economic recovery picked up speed in the last three months of 2010, stoking hopes of strengthening demand for raw materials.

The US economy grew at its fastest clip in five years in 2010, the Commerce Department reported, as the country bounced back from recession and fears of a double-dip recession ebbed.

Gross domestic product (GDP) growth hit 2.9 percent in 2010, reversing the 2.6 percent contraction seen the previous year in the United States, which is the world's biggest consumer of crude.

"The GDP release strengthens the case that the US recovery is on the right track even though that was no major bullish surprise," SEB analyst Filip Petersson told AFP.

Officials also reported a late surge in consumer spending and an improving trade balance that pumped growth up to 3.2 percent in the last quarter.

"The late 2010 crude oil rally would not have been possible without that back-drop (of the growing US economy), despite low temperatures in the northern hemisphere and strong Chinese product demand," added Petersson.

OIL: London Brent oil surged as high as $99.74 per barrel in late afternoon trading on Friday, striking a new two-year peak.

"Oil prices rebounded ... supported by strong US GDP figures that showed that the US economy expanded by 3.2 percent in the fourth quarter of 2010, raising hopes for increasing oil demand," said Sucden analyst Myrto Sokou.

The crude oil market won further support from intensifying political unrest in Egypt.

Oil jumped "on the back of concerns that increased unrest in Egypt and the rest of North Africa could impact the Suez Canal and the safe passage of oil and gas to and from Europe", added CMC Markets analyst Michael Hewson.

Embattled Egyptian President Hosni Mubarak called out the army and declared a nationwide curfew on Friday, as tens of thousands of protesters rampaged through the streets demanding his ouster.

With street battles raging, key allies the United States, Britain and Germany expressed concern about the violence.

Elsewhere this week, OPEC kingpin Saudi Arabia has suggested that the cartel could still raise its crude output to meet an increase in demand, amid high US inventories.

The Organization of Petroleum Exporting Countries (OPEC) could raise output to meet a "two percent" increase in demand during 2011, Saudi's oil minister Ali al-Naimi said on Monday.

Meanwhile, the gap between Brent and New York has widened to a record, at more than $12 dollars, owing to the high level of crude stockpiles at the Cushing storage depot in Oklahoma.

By Friday afternoon on London's Intercontinental Exchange, Brent North Sea crude for delivery in March leapt to $99.34 a barrel from $96.86 a week earlier.

On the New York Mercantile Exchange, Texas light sweet crude for March delivery eased to $88.75 a barrel from $89.36.

PRECIOUS METALS: Gold prices slipped but the the precious metal remains within grasp of its recent record peak.

The glamorous commodity had hit a record 1,431.25 dollars on December 7, boosted by its safe-haven status as investors fretted over the eurozone debt crisis.

Gold has since retreated somewhat amid growing doubts about the strength of the worldwide economic recovery.

"While the gold price has seen a modest pull-back from its 2010 highs toward year-end and into January 2011, the move is by no means unprecendented or unusual," said the World Gold Council in a report.

Gold struck record peaks last year, helped also by particularly strong jewellery demand from India and keen investment buying from China.

By late Friday on the London Bullion Market, gold eased to $1,334.50 an ounce from $1,343.50 a week earlier.

Silver dropped to $26.68 an ounce from $27.14.

On the London Platinum and Palladium Market, platinum edged down to $1784 an ounce from $1,817.

Palladium dipped to $806 an ounce from $814.

BASE METALS: Base or industrial metals rose across the board in the wake of the US growth data.

"It was certainly the robust US fourth-quarter GDP figures that changed market sentiment and spread optimistic signs across the commodity markets," added Sokou.

"Base metals prices rebounded, following a recent consolidation phase, and posted strong gains."

Tin witnessed a record-breaking week that culminated with a historic peak of $30,040 on Friday, driven also by supply concerns in key producer Indonesia.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months rose to $9,628 a tonne from $9,485.75 a week earlier.

Three-month aluminium increased to $2,470 a tonne from $2,433.

Three-month lead firmed to $2,460 a tonne from $2,454.

Three-month tin jumped to $29,650 a tonne from $27,720 a week earlier.

Three-month zinc gained in value to $2,340 a tonne from $2,333.50.

Three-month nickel grew to $26,890 a tonne from $26,180.

COCOA: Cocoa hit another one-year pinnacle at $3,420 a tonne in New York as political uncertainty in Ivory Coast stoked supply concerns.

"We believe that short-term driver for cocoa price movement would continue to be driven by sentiment towards political developments rather than actual export data," said Barclays Capital analyst Xin Yi Chen.

Prices rallied as Alassane Ouattara ordered exports halted for a month to put pressure on former president Laurent Gbagbo, the incumbent who is refusing to stand aside.

Despite Gbagbo's insistence that the move would have no effect, the decision by the west African country, which produces a third of the world's cocoa, has rocked the market.

The price of a tonne of cocoa also reached a six-month high of £2,307 in London.

The turbulence shows that buyers have little choice but to respect the international consensus that Ouattara won the November 28 elections, analysts said.

By Friday on LIFFE, London's futures exchange, cocoa for March rose to £2,177 a tonne from £2,160 a week earlier.

On the New York Board of Trade (NYBOT), cocoa for delivery in March rallied to $3,298 a tonne from $3,237 a week earlier.

COFFEE: Coffee prices witnessed mixed trade.

By Friday on NYBOT, Arabica for delivery in March gained to 244 cents a pound from 238.95 cents a week earlier.

On LIFFE, Robusta for March eased to $2,124 a tonne from $2,154 a week earlier.

SUGAR: Sugar futures approached recent 30-year high points amid weather concerns in key producer Brazil.

"In the next few days, heavy rain is forecast in the main growing areas for sugarcane and coffee in southeast Brazil," said Commerzbank analysts.

"This improves the crop outlook for the sugarcane harvest beginning in March and the coffee harvest that starts at the end of April ... and this could put pressure on prices."

By Friday this week on NYBOT, the price of unrefined sugar for delivery in March rallied to 34.12 US cents a pound from 30.88 cents a week earlier.

On LIFFE, the price of a tonne of white sugar for March increased to £820.30 from £770.20 a week earlier.

GRAINS AND SOYA: Prices steadied as traders eyed prevailing weather conditions in key producing countries.

By Friday on the Chicago Board of Trade, March-dated soyabean meal -- used in animal feed -- rose to $14.15 a bushel from $14.09 a week earlier.

Maize for delivery in March eased to $6.53 a bushel from $6.57.

Wheat for March increased to $8.34 from $8.24.

© 2011 AFP

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