Base Metals and Oil Rise

LONDON, Aug. 14 -- Base metals moved higher while crude oil prices rose by more than $1 a barrel as commodity markets rallied after better-than expected economic data fuelled hopes that the eurozone's recession was close to ending. But disappointing US July retail sales data dragged prices back from their best levels of the session.

    Base metals were the clearest beneficiary of an improvement in risk appetite yesterday, with copper, nickel and zinc hitting fresh highs for the year.

    Copper gained 3.6 per cent at $6,410 a tonne after hitting $6,450 while nickel rose 4.9 per cent to $20,605 a tonne after reaching $21,225 and zinc increased 3.2 per cent to $1,910 a tonne after touching $1,945.

    Nickel and zinc prices have found support from rising Chinese imports and the government's stimulus package, which has led to many infrastructure projects being fast tracked for completion.

    Aluminium added 4 per cent at $2,065 a tonne while lead gained 4.3 per cent at 1,925 a tonne. Tin lagged behind, rising just 1.7 per cent to $15,100 a tonne.

    The sugar market paused for breath after sprinting higher this week. ICE October raw sugar, the global benchmark, reached 23.32 cents a pound, the highest level since 1981, but later traded 1.8 per cent lower at 22.55 cents. But refined sugar prices continued to rise with Liffe October white sugar up 0.9 per cent at $575.2 a tonne.

    Weather reports from India, the world's largest sugar consumer, underlined concerns about this year's monsoon with rainfall 56 per cent below average, down for a third week in succession. Some of India's key agricultural growing regions look certain to face drought.

    "This is definitely going to be a drought year, but the good news is that we think stocks of food grains are fairly comfortable," said Atsi Sheth, chief economist of Reliance Equities in Mumbai: "But government distribution channels will have to work overtime to ensure mass-starvation is not an outcome."

    Gold rose 1 per cent to $956 a troy ounce, bolstered by dollar weakness.

    Silver breached the $15 a troy ounce level, reaching $15.03 before easing back to $14.95, up 3 per cent. Michael Jansen of JPMorgan said silver was an example of the "recovery trade" and the rebound in any commodity linked to a revival in global industrial activity.

    In oil markets, Nymex September West Texas Intermediate rose 36 cents to $70.52 a barrel while ICE September Brent gained 59 cents at $73.48.

    US natural gas prices dipped after the latest US inventories data with gas in storage up 63bn cubic feet, matching the consensus forecast for an increase of 65bn cubic feet. Nymex September Henry Hub eased 1½ cents, 0.4 per cent, to $3.464 per million British thermal units (mBtu).

    Francisco Blanch, commodity strategist at Banc of America Securities-Merrill Lynch, said natural gas prices could temporarily dip below the $3mBtu level this year as stocks have risen to near record levels and storage capacity is limited.

    But Mr Blanch expects the market to turn next year with prices forecast to average $6mBtu in 2010 as demand rises, helped by a recovery in US industrial activity and the Obama administration's clean energy agenda.

    (Source: Financial Times)