Energy and metal prices remain buoyant - Oil hits fresh seven-month high above $70

Energy and metal prices remain buoyant - Oil hits fresh seven-month high above $70
By Chris Flood
Copyright The Financial Times Limited 2009
Published: June 5 2009 10:54 | Last updated: June 5 2009 20:13
http://www.ft.com/cms/s/0/6a1f3e2c-51b2-11de-b986-00144feabdc0.html


Commodity markets rallied strongly this week, helped by growing confidence in prospects for a rapid revival in the global economy following more evidence of improvement in leading indicators.

Investor inflows into commodities have picked up pace, helping lift prices in energy, agricultural and base metals markets.

In the oil market, Nymex July West Texas Intermediate reached $70.32 on Friday, a seven-month high, but later retreated to trade 25 cents lower at $68.56 a barrel, up 3.4 per cent this week.

ICE July Brent hit $69.91 but later eased back to trade 41 cents lower at $68.30, up 4.2 per cent on the week.

On Thursday, Goldman Sachs raised its 2009 year-end projection for oil prices from $65 a barrel to $85 a barrel and dropped its previous forecast for a pullback in the next three months.

Tom Pawlicki of MF Global said: “Unabated investment growth in commodities like crude oil will be fuelled further by such predictions.”

Gareth Lewis-Davies of Commerzbank said oil prices prices had risen in the past few months largely as a consequence of a decline in investor risk aversion. “However, the upward move in prices is totally disproportionate to the reductions in inventories seen so far,” he said.

“Only US gasoline inventory levels offer true price support as crude oil and other product inventories are currently at high levels.”

Gold fell 2 per cent to $959.50 a troy ounce on Friday, retreating after the dollar gained in response to better US employment data than expected.

Gold hit $989.80 on Wednesday but lost 2 per cent over the week as investor inflows into gold exchange-traded funds and buying interest from jewellery makers remained muted.

However, Rupert Robinson, chief executive of Schroders Private Bank, said “all the ingredients” were in place for a bull run in gold and gold stocks.

“The dollar is beginning to wobble, US Treasuries are under pressure and inflation is set to rise,” said Mr Robinson.

Among the base metals, copper rose 3.5 per cent to $5,000 a tonne this week. Analysts at RBS warned that global copper stocks were declining to critically low levels, having fallen from a peak of 619,000 tonnes to 400,000 tonnes, sufficient for just 3.4 weeks of consumption.

RBS noted that the recovery in copper demand had not yet started and warned that “price fireworks” were likely in the fourth quarter.

Aluminium breached the $1,600 a tonne level on Friday for the first time since early January and reached $1,610.5 before easing back to $1,572, up 9.2 per cent this week. Short closing helped aluminium rise but traders warned that further price gains would be limited by massive global stocks, estimated at 4.4m tonnes, or 40 days of consumption.