Oil rises towards $72 a barrel - Currency movements help base metals to advance

Oil rises towards $72 a barrel - Currency movements help base metals to advance
By Miles Johnson
Copyright The Financial Times Limited 2009
Published: June 19 2009 11:37 | Last updated: June 19 2009 11:37
http://www.ft.com/cms/s/0/5ee26844-5cbc-11de-9d42-00144feabdc0.html


Oil prices rose back towards the $72 a barrel mark on Friday, with bullish sentiment bolstered by yesterday’s improved US economic data and continued supply concerns in Nigeria.

Oil futures, which many investors have been purchasing to gain exposure to a recovery in global economic activity, ticked upwards yesterday after an influential business activity index from the Philadelphia Federal Reserve posted its highest reading since before the collapse of the investment bank Lehman Brothers sent shock waves through global markets last September.

Attacks on pipelines by militants in Opec member Nigeria, through not widely seen as market moving news, helped to provide a reminder to energy traders of political risk factors alongside the ongoing election dispute in Iran.

Nymex July West Texas Intermediate oil, the US benchmark, rose 68 cents to $72.05, while the August contract rose 72 cents to $72.63. ICE August Brent, its European equivalent, gained 74 cents at $71.80.

Elsewhere gold was flat at $934 a troy ounce as analysts stressed weak jewellery demand in India, traditionally a seasonal driver for prices, as worrying for the yellow metal’s outlook.

“We believe that three factors have driven this weak showing,” said UBS precious metals analysts. “Firstly, the time of the year is not very supportive for strong buying, as the summer fabrication shutdown approaches in the northern hemisphere: secondly, orders in the developed world are likely very weak due to the economic slowdown and uncertainty about consumer spending; and finally, the price has not corrected enough to make gold attractive to the trade”.

“Barring a much deeper correction in the gold price, we expect sales to the jewellery industry to remain subdued for the next two or three months, perhaps increasing gold’s vulnerability to the downside”.

Base metals however enjoyed a bounce as the US dollar came under pressure and commodity currencies such as the Australian dollar made strong showings. Aluminium gained 1.5 per cent to $1660 per tonne, copper rose 0.1 per cent to $4985 a tonne, and zinc gained 1.5 per cent to $1590 a tonne.