London sugar futures ended mostly firmer on Thursday buoyed by further fund covering and dealers said the market remained supported in the short term.
Front-month March closed $2.20 up at $196.60 a tonne, having moved between $197.00 and $194.30 on 3,754 lots from total turnover of 8,838 lots. May gained $2.50 to $197.90 on 2,819 lots.
The March-May spread was quoted around a $1.00 to $1.20 discount, relatively unchanged from Wednesday.
"We have seen fund short covering today on the May and also on the March. The market can come down again but overall in the coming month prices should firm because of a tightness of Brazilian supplies," one dealer said.
Dealers said the front spread in London would continue to remain choppy in the run-up to the March contact's expiry on February 13.
"The funds have been buying the flat price and there is trade selling on the March, with someone trying to buy the May," another dealer said.
Traders said the funds would be a key driver on the London and New York markets.
"For the last couple of weeks we have seen much more bullish sentiment as the funds were over-short in New York. Overall, the raws market is in a 5.50 to 6.50 cent range. I doubt any rally will extend beyond there," the second trader said.
Technical analysts further gains were on the cards with resistance on March seen at $200.00 after breaching $195.00. Support was pegged at $192.00.
Analysts saw pressure in the coming months due to surplus global stocks and a lack of strong demand.
"The fundamental outlook remains decidedly bearish and (recent) higher prices were nothing more than a technical correction after recent steep declines. Hence, the outlook remains unfavourable for those exporters dependent on world market prices," German analyst F.O. Licht said in its latest weekly report.
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