By Chris Flood
Published: January 5 2010 12:04 | Last updated: January 5 2010 12:04
Copper dipped on Tuesday after hitting a 16-month high in the previous session, but crude oil maintained its upward mometum and sugar prices extended their record-breaking run as commodity markets continued with their strong start to trading in 2010.
Copper dipped 0.8 per cent to $7,449.75 a tonne as Codelco, the world’s largest copper producer, made an improved pay offer to workers at its Chuquicamata mine in an effort to defuse a strike which started on Monday.
Chuquicamata is the world’s second largest copper mine which produces about 3.6 per cent of global supply and traders feared that the strike could cost Codelco up to 1,800 tonnes of lost output per day.
“It looks like we could get an agreement at Chuquicamata,” said Dan Brebner, analyst at Deutsche Bank: “We’ve had a nice run up in copper and I suspect profit-taking on that kind of news is a possibility.”
Crude oil prices made modest gains with Nymex February West Texas Intermediate up 7 cents at $81.58 a barrel while ICE February Brent also added 7 cents at $80.19 a barrel.
Technical analysts said that crude oil prices have reached important levels with WTI managing to finish Monday’s session above the closing high of the previous rally ($81.37 on October 21). The next target for WTI appears to be $82 a barrel.
Meanwhile Brent appeared to be overcoming resistance around the $80 a barrel mark and traders felt that a close above that level could pave the way for further gains.
“Near-term targets have been met in Brent and WTI crude, and further gains are expected as the bull cycle resumes,” said Dan Smith, analyst at Standard Chartered.
Hedge funds also appeared more bullish on the outlook for oil prices. The latest data from the Commodity Futures Trading Commission showed that speculators increased their net long positions (bets on prices rising) for crude oil, petrol and heating oil in the week ending Tuesday December 29.
The speculative net long position for heating oil almost doubled while the net long position for crude oil rose by 22 per cent compared with the previous week.
Eugen Weinberg, analyst at Commerzbank, said the CFTC data pointed to heightened interest from investors in commodity markets.
“Apparently, institutional investors made their asset allocation decisions at the end of the old or right at the start of the new year and positioned themselves on the commodities market,” said Mr Weinberg. He also cautioned that an “excessively bullish” view on the outlook for oil prices was a risk.
Sugar prices extended their record-breaking run with stocks at a record low and fears that the market will face acute supply shortages early in 2010.
Liffe March white sugar rose 1 per cent to a record $729.2 a tonne while ICE March raw sugar broke above the 28 cents a pound mark, rising 1.8 per cent to 28.15 cents a pound.
