Commodities prices firmed on Monday, supported by India's stronger-than-expected economic growth in the third quarter and renewed US dollar weakness.
But traders were cautious as raw materials' demand remains lacklustre outside Asia and Dubai's woes have highlighted the fragility of the global recovery.
"Dubai's crisis clearly shows that the financial system is far from being sustainable," said JBC Energy, the Vienna-based oil consultancy. Analysts were, nonetheless, hopeful that Dubai will have not a lasting impact on emerging economies, which are the main driver of crude oil and other commodities' demand growth.
In the energy market, oil prices were supported by strong demand in Asia. The region's benchmark, Dubai oil, moved to a rare premium against both Brent and WTI, suggesting that crude oil is moving from the Atlantic into the Pacific Basin.
In morning trading in London, Nymex January West Texas Intermediate rose 41 cents to USD76.45 a barrel while ICE January Brent moved 44 cents higher to USD77.62 a barrel. Spot Dubai oil traded at USD77.25 a barrel, according to Reuters data.
Barclays Capital said in a research note that "oil prices could be at the mercy of the renewed financial pessimism till further clarity on the Dubai situation emerges."
Precious metals were little changed in early trading, with spot gold in London at USD1,1166 a troy ounce, down 0.8 per cent from Friday's last quote in New York. Gold prices set an all-time high last week at USD1,194.90 an ounce.
Base metals prices were mixed in early trading. On the London Metal Exchange, copper for delivery in three months rose 0.4 per cent to USD6,885 a tonne while aluminium moved 1 per cent higher to USD2,035 a tonne. Lead and nickel posted small losses, while tin and zinc were higher.
In the agricultural and soft commodities market, grains and oilseeds were higher, cocoa posted gains but sugar was down.
In morning trading in London, CBOT December corn rose 0.4 per cent to USD3.98½ a bushel, while the more actively traded March contract rose to USD4.13¾ a bushel. CBOT January soyabean rose 1 per cent to USD10.63½ a bushel.
US rice prices were also higher supported by strong import demand from the Philippines, the world's biggest importer, and fears that India will need to buy rice overseas to offset a large drop in domestic output. CBOT January rice rose 0.5 per cent to USD15.470 per 100 pounds, near the highest level in a year.
Liffe March cocoa rose 1.2 per cent to £2,200 a tonne, hovering near a 24-year high of £2,285 a tonne set in 1985. If the market rallies above that level, prices will be at the highest since 1977. Cocoa prices were supported by a drop in the value of the sterling pound against the euro and fears that production in the Ivory Coast, the world's largest supplier, will drop in the 2009-10 year in spite of a strong start of the harvest.
