LONDON: Commodities enjoyed a bright start to 2010, with oil bouncing above $83 and sugar striking a 29-year high as traders eyed recovery hopes despite poor US jobs data.
We have been highlighting for some time that there is still considerable upside risk to commodity prices in early 2010, said Barclays Capital analyst Kevin Norrish in a research note to clients.
It is our view that markets have underestimated the strength of the economic growth rebound in the first quarter – and that it is still a little early to exit the recovery trade.
Markets tailed off somewhat on Friday as traders digested news that the United States -a major consumer of raw materials – shed more jobs than expected in December.
Most commodities rallied in 2009 on keen demand and signs of global economic recovery, with oil soaring about 80 percent and gold hitting record peaks.
Oil
The market jumped in the first trading week of 2010 largely because of a cold snap across the northern hemisphere which boosted heating fuel demand but players pared gains after a downbeat US jobs report.
New York crude topped $83 on Wednesday for the first time for 14 months before closing lower on Thursday for the first time in 10 sessions as traders banked profits.
Oil begun 2010 with a bang on Monday, soaring by more than $2 as freezing temperatures spread.
Reports that Russia had cut supplies to Belarus also helped push prices higher but officials in Belarus later denied the reports.
Cold weather across the northern hemisphere propelled crude prices $2 higher, said David Hufton, oil analyst at PVM brokers.
Help also came from Russia s oil dispute with Belarus and universally positive manufacturing data from China, India, Korea, the UK and US.
Gains for oil tailed off towards the end of the week in the wake of the latest US energy inventory data and the downbeat US non-farm payrolls report.
US crude oil reserves rose by 1.3 million barrels in the week ending Jan. 1, instead of the expected drop of some 300,000 barrels.
Stockpiles of distillates – including heating fuel and diesel – fell 300,000 barrels in the week, sharply below forecasts for a 1.8-million-barrel drop amid the cold weather.
Prices fell again on Friday after data showed that the US – the world s biggest energy consuming nation – shed 85,000 jobs in December, much more than expected.
Oil jumped by around 80 percent in 2009 as traders were heartened by evidence that the battered global economy was on the mend, with the eurozone, Japan and the United States escaping a fierce recession.
By late Friday, New York s main futures contract, light sweet crude for delivery in February, rallied to $82.22 a barrel from $79.36 on Thursday of the previous week.
London s Brent North Sea crude for February advanced to $81.05 from $77.93.
Precious metals
Platinum and palladium prices soared to equal recent highs after the US launch of exchange traded funds (ETFs) for both metals.
Platinum rallied as high as $1,578 per ounce, the best level since August 2008 while palladium hit $434.25 an ounce, the best since July that year.
The new ETFs – which allow traders to invest money more easily in the commodities, without trading on the futures market – were launched in the United States on Friday.
Both (platinum and palladium) could gain serious traction should ETF investment demand prove strong, said analyst James Moore at the BullionDesk, a specialist metals website.
By Friday on the London Bullion Market, gold rose to $1,126.75 an ounce, from $1,104 the previous Thursday before the New Year holiday break.
Silver soared to $18.12 an ounce from $16.99.
On the London Platinum and Palladium Market, platinum soared to $1,569 an ounce from $1,466.
Palladium jumped to $431 an ounce from $402.
Base metals
Base metals diverged but copper hit multi-month highs on news of a strike in key producer Chile which was later settled.
Copper struck $7,796 per ton on Thursday, its highest level since August 2008.
Copper marked a new 16-month high, despite the fact that the workers at Chuquicamata mine in Chile agreed with Codelco s offer and ended the strike, said Commerzbank analyst Carsten Fritsch.
Employees at two giant northern Chile copper mines that produce over 4 percent of the world s copper returned to work Wednesday with promises of higher pay after a two-day strike, officials said.
The 5,600 employees of the Chuquicamata and Mina Sur mines, owned by the world s biggest mining concern Codelco, went back to work after agreeing to a 4.0 percent wage hike and a bonus payment of $24,000.
Since early last year, copper prices have rocketed by more than 130 percent, spurred upward by signs of global economic recovery and Chinese demand.
By Friday on the London Metal Exchange, copper for delivery in three months jumped to $7,525 a tone from $7,408 on Thursday of the previous week.
Three-month aluminum rose to $2,323 a ton from $2,245.
Three-month lead gained to $2,580 a ton from $2,440.
Three-month tin increased to $17,571 a ton from $16,875.
Three-month zinc eased to $2,570 a ton from $2,575.
Three-month nickel fell to $18,330 a ton from $18,848.
Sugar
Sugar prices scaled 29-year highs, lifted by predictions of lower output in emerging economic giant India.
On Thursday, unrefined sugar hit 28.95 US cents a pound, the highest level since January 1981.
Downgrades to forecasts of Indian production after a weak first three months of the 2009-10 season are buoying prices, signaling the need for higher imports, said Barclays Capital analysts.
The commodity more than doubled in value last year owing to tight supplies and keen demand.
By Friday on the New York Board of Trade (NYBOT), the price of unrefined sugar for March rose to 28.14 US cents a pound from 27.24 cents on Thursday of the previous week.
On LIFFE, London s futures exchange, the price of a ton of white sugar for delivery in March climbed to £730.30 from £706.30.
Cocoa
Prices rose towards their recent 30-year high on production concerns in leading producer Ivory Coast.
Cocoa is rising in value amid concerns that Ivory Coast production may start tailing off, said Macquarie Securities analyst Kona Haque.
In London on Dec. 17, cocoa struck £2,337 a ton – a level last seen in October 1977.
By Friday on LIFFE, the price of cocoa for delivery in March rose to £2,282 a ton from £2,216 on Thursday of the previous week.
On the NYBOT, the March cocoa contract rose to $3,312 a ton from $3,262.
Coffee
Coffee prices soared as investment funds returned to the market.
Funds made their mark across much of the commodities complex … when trading for the year got underway, said Sucden analyst Ralph Hawes.
By Friday on LIFFE, Robusta for delivery in March rallied to $1,397 a ton from $1,323 on Thursday of the previous week.
On the NYBOT, Arabica for March rose to 144.75 US cents a pound from 137.95 cents.
Grains and soya
Grains and soya prices diverged in subdued trade.
The funds have been buying but not as aggressively as expected, noted US Commodities analyst Jason Roose.
By Friday on the Chicago Board of Trade, maize for delivery in March firmed to $4.18 a bushel from $4.14 on Thursday of the previous week.
March-dated soyabean meal – used in animal feed – fell to $10.21 from $10.48.
Wheat for March rose to $5.58 a bushel from $5.41.
