Commodity prices rebound

Commodity markets rebounded last week on expectations that the US economy will haul itself out of recession and spur demand for raw materials. Upbeat US company results and rising home sales fuelled optimism that the world's biggest energy consuming nation may soon emerge from the downturn. "Commodity index returns have continued their upward march over the past week," said Deutsche Bank research analyst Michael Lewis.
He added: "We believe these higher returns are benefiting from recent strength in the US equity market and the increasing likelihood that the United States will move out of recession by the end of the current quarter." Voracious Chinese demand also boosted prices, particularly for agricultural commodities and industrial metals.
OIL: World oil prices cruised towards 70 dollars, aided by rebounding stock markets, a weaker dollar and hopes that a global economic recovery could kick-start energy demand. "With equity prices on the up, this is serving to boost oil prices too - as the two asset classes seem to be so intrinsically linked at the moment," said Capital Spreads analyst Simon Denham.
Global equities surged ahead this week in a blistering rally which has taken them back up to their January levels owing to positive US earnings and data. "Corporate earnings and US house sales provided the drive," added PVM oil analyst David Hufton.
"AT&T and 3M among others posted better quarterly results than expected although Microsoft and Amazon were less impressive. "It's the good news that is being heard and, even though profits are well below last year's levels, expectations have been set so low that pleasant surprises are becoming the norm." US existing home sales rose for the third consecutive month in June. A revived housing market is considered vital to the US economy's recovery.
"If it was the collapse of the US housing market that burst the bubble, then any sign of a revival is of major significance," added Hufton. The blue chip Dow Jones Industrial Average had gained more than two percent on Thursday to finish above the 9,000-point level for the first time since January.
One year ago, oil prices had struck record peaks above 147 dollars - but they have since collapsed in line with slumping energy demand. But over the past 12 months, prices have nose-dived, striking 32 dollars in December before clawing back some ground.
By Friday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in September jumped to 67.00 dollars a barrel from 63.45 dollars one week earlier for the August contract that expired Tuesday. On London's InterContinental Exchange (ICE), Brent North Sea crude for September delivery climbed to 69.31 dollars a barrel from 65.15 dollars a week earlier.
PRECIOUS METALS: Precious metals rose across the board this week, with gold winning support from the weakening US currency. A weaker dollar can make commodities prices in the US unit cheaper for buyers holding rival currencies, pushing up demand in the short term.
"The dollar remained the dominant driver of gold," said UBS analyst John Reade. He added: "China may overtake India to become the world's top gold consumer this year, the World Gold Council said, as the nation became the first of the major economies to rebound from the global recession." By late Friday on the London Bullion Market, gold rose to 951.50 dollars an ounce from 937.50 dollars a week earlier.
Silver climbed to 13.78 dollars an ounce from 13.16 dollars. On the London Platinum and Palladium Market, platinum grew to 1,186 dollars an ounce at the late fixing on Friday from 1,165 dollars. Palladium increased to 258 dollars an ounce from 245 dollars.
BASE METALS: Base metals prices soared, with aluminium and copper striking nine-month peaks on solid Chinese demand. "Sentiment continues to improve as economic data show that not only is the worst behind us, but that growth in key metals-consuming countries, such as China, is speeding up," said Barclays Capital analysts.
Copper raced as high as 5,575 dollars per tonne while aluminium touched 1,808 dollars per tonne. "The complex continues to benefit from rallying equities and a weaker dollar amid more positive macro data, especially with US existing home sales rising for a third consecutive month," added VTB Capital analyst Andrey Kryuchenkov.
"We would expect more volatility next week, though a pullback could still happen after some consolidation near new highs." By Friday on the London Metal Exchange, copper for delivery in three months jumped to 5,567 dollars a tonne from 5,325 dollars a week earlier.
-- Three-month aluminium climbed to 1,801 dollars a tonne from 1,725 dollars.
-- Three-month lead rose to 1,770 dollars a tonne from 1,675 dollars.
-- Three-month tin gained to 14,760 dollars a tonne from 13,275 dollars.
-- Three-month zinc increased to 1,715 dollars a tonne from 1,546 dollars.
-- Three-month nickel grew to 16,700 dollars a tonne from 16,100 dollars.
COCOA: Cocoa prices were also energised by demand from China. "Across soft commodities, import trends were very strong for cocoa, with China's imports coming in at their highest since last September," said Barclays Capital analysts.
By Friday on Liffe, London's futures exchange, the price of cocoa for delivery in September rose to 1,815 pounds a tonne from 1,750 pounds a week earlier. On the New York Board of Trade (NYBOT), the September cocoa contract jumped to 2,845 dollars a tonne from 2,735 dollars.
COFFEE: Coffee prices hit six-week peaks. "Providing some support to the coffee market was the release over the weekend of Colombia's latest monthly coffee data," said analysts at Barclays Capital. "This saw coffee production and exports in June down 35 percent and 34 percent year-on-year, respectively, with little evidence of a recovery from earlier harvest weakness," they added. By Friday on Liffe, Robusta for delivery in September climbed to 1,493 dollars a tonne from 1,440 dollars a week earlier. On the NYBOT, Arabica for September rose to 124.30 US cents a pound from 114.25 cents.
SUGAR: Sugar prices rallied. On Liffe, the price of a tonne of white sugar for delivery in October grew to 475.70 pounds from 460.20 pounds a week earlier. On NYBOT, the price of unrefined sugar for October climbed to 18.34 US cents a pound from 17.44 cents.
RUBBER: Malaysian rubber prices rose this week on strong demand for the commodity, dealers said. They said the market received enquiries from China and South Korea, while the prices were also boosted by tight supplies due to rainy weather in certain parts of the country. On Friday, the Malaysian Rubber Board's benchmark SMR20 advanced to 171.95 US cents per kilo, from 163.80 cents a week earlier.