Copper edged higher on Monday as a rise in oil prices offset softer Chinese economic data and an escalation in tension between the United States and Iran, analysts said.
Commerzbank analyst Daniel Briesemann said the jump in oil prices since the United States killed Iranian general Qassem Soleimani would push up miners' costs and this was leaving base metals relatively resilient to increased geopolitical tension.
"Base metals have held up well but they will come under some pressure because of risk aversion," said Briesemann said.
Benchmark copper on the London Metal Exchange (LME) ended 0.1% higher at $6,138 a tonne, climbing towards an eight-month high.
Iran said it would retaliate against the United States after the killing of Soleimani last week, prompting some investors to shed riskier stocks and move into safe-haven assets such as gold, government bonds and the yen.
A weaker dollar on Monday also helped commodities prices to firm.
The downbeat reading of China's services sector, which accounts for more than half of the top metal consumer's economy, highlighted corporate concerns over subdued economic conditions The services report came on top of data last week that showed activity in the construction sector had pulled back.
The net speculative long in copper was 11% of open interest as at Thursday's close, estimates by Marex Spectron showed.
A Chinese delegation plans to visit Washington on Jan. 13 for the signing of a US-China Phase 1 trade deal, the South China Morning Post reported on Sunday.
A thawing in trade relations between the two economic giants helped copper to climb more than 5% in December, though Commerzbank analysts said subsequent negotiations on further partial agreements will prove "far more difficult because they will address sensitive issues".
First Quantum Minerals Ltd fell as much as nearly 4% on Monday after the copper miner said it had adopted a poison pill takeover defense, nearly a month after China's Jiangxi Copper Co Ltd, agreed to pay $1.1 billion to become its largest shareholder.
Copper prices have been hit by the US-Iran situation and flight from market risk, Goldman Sachs said.
"Further escalation of geopolitical tensions has the potential to dampen economic activity and weaken base metals demand," the bank's analysts said, though they remain bullish on copper owing to depressed margins at smelters.
Cash aluminium deepened its discount to the three-month contract, pointing to plentiful supply. It stood at $33 a tonne, the deepest discount since mid-September.
On-warrant inventories of aluminium in LME-approved warehouses rose to 938,650 tonnes.
Aluminium rose 0.5% to $1,833 a tonne, after touching its highest since July 22.
Zinc climbed 0.8% to $2,324.50 a tonne, its highest in two weeks, lead ended at a steady $1,920, tin rose 0.3% to $16,850 and nickel edged up by 0.5% to $13,820 after touching its lowest in nearly four weeks.
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