By Chris Flood
Published: January 11 2010 11:47 | Last updated: January 11 2010 11:47
Strong economic data from China helped commodity markets make a positive start to trading on Monday with US crude oil pushing close to the $84 a barrel mark while base metals moved higher and gold prices also strengthened.
Trade data for December showed China has overtaken Germany as the world’s largest exporter. China’s exports rose 17.7 per cent in December compared with the same month in the previous year while imports jumped 55.9 per cent with trade flows receiving huge boost from the government’s stimulus package.
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Crude oil prices rallied, with Nymex February West Texas Intermediate reaching $83.67 before easing back to trade 77 cents higher at $83.52 a barrel.
ICE February Brent rose 70 cents to $82.07 a barrel after hitting a session high of $82.25.
China’s crude oil imports rose beyond 5m barrels per day mark for the first time in December, up more than 20 per cent from the previous month.
“Financial market participants may use the data to push oil prices up further, notwithstanding the fact that exports of oil products also expanded sharply,” said Eugen Weinberg, commodities strategist at Commerzbank.
“This shows that more crude oil is being imported and processed than is needed for China’s own consumption.”
Hedge funds have continued to expand their bets on the rally for oil prices continuing. The latest data from the Commodities Futures Trading Commission showed the speculative net long position up 21,000 lots to 154,775 lots in the week ending January 5, just below the record high reached in late October.
Meanwhile, the speculative net short position (bets on prices falling) for US natural gas also rose, in spite of cold winter weather affecting much of North America.
Nymex February Henry Hub traded just under 13 cents, or 2.3 per cent, lower at $5.613 per million British thermal units.
Mr Weinberg said the data showed that the investment strategy of balancing long oil with short natural gas positions remained popular with hedge funds but this was increasing the risk of a “massive price correction” if position unwinding started.
“This could potentially be triggered by the sustained cold weather in the northern hemisphere that should result in higher demand for natural gas in particular,” said Mr Weinberg.
In the UK, gas prices rose after Norway cut offshore production over the weekend because of weather-related disruptions, reducing supplies to Britain. Norway is the UK’s largest gas supplier.
Gas for delivery within a day jumped 34 per cent to 50 pence a therm, according to Bloomberg.
Gassco, Norway’s gas network operator, said the Kaarstoe processing plant was operating at about two-thirds capacity as cold weather curbed output.
“The situation has improved and we hope Kaarstoe will be up to full capacity during the day,“ said Gassco
Among the base metals, aluminium traded 1.8 per cent higher at $2,352 a tonne while copper gained 2 per cent to $7,660 a tonne.
Gold rallied amid renewed dollar weakness following disappointing US employment data for December, released on Friday.
Gold traded at $1,157 a troy ounce after ending Friday’s session in New York at $1,136.10.
