By Courtney Weaver
Published: January 20 2010 12:02 | Last updated: January 20 2010 12:02
Oil prices fell sharply for a second day on Wednesday, while refined sugar bounded ahead to a fresh all-time high.
In London, ICE Brent for March delivery dropped $1 to $76.63 a barrel against a stronger US dollar, while West Texas Intermediate crude futures for February delivery fell $1 to $78.02 a barrel.
Morgan Stanley forecast that oil prices would have a weaker correlation to the dollar and US equities going forward, as inflation expectations became a new driver for prices.
While the brokerage said it expected the greenback to appreciate 10 per cent against other developed market currencies, it added that this would only be an “absence of a tailwind for oil prices”.
Among soft commodities, Liffe March white, or refined, sugar gained 1 per cent to £751 a tonne, a fresh all-time high. In New York, raw sugar reached a fresh 29-year high, rising 0.3 per cent to just over 29 cents.
Both white and raw sugar have benefited from inclement weather in India and Brazil, which has eaten into global supplies. India, the world’s largest sugar producer, had to turn to the market itself this season to meet its own demand.
Cocoa, another soft commodity, traded slightly lower, retreating from its 32-year high set in mid-December. In London, the benchmark Liffe May cocoa held steady at £2,318, while in New York ICE cocoa for March delivery slipped 0.6 per cent to $3,441.
Among precious metals, gold declined against the backdrop of the stronger dollar. The metal fell more than 1 per cent to $1,129.40.
In early trading, platinum rose to a new 17-month high, surging to $1,654 a troy ounce before slipping back. The metal was down 1 per cent to $1,625 a troy ounce, while palladium was also lower, declining 1.2 per cent to $458 an ounce.
Bank of America Merrill Lynch predicted platinum would average $1,750 a troy ounce in 2010 and $2,000 a troy ounce in 2011, due to the newly-launched investment vehicles for platinum and palladium sales in the US. The physically backed exchange-traded funds buy platinum and palladium in the open market and then move them into vaults, therefore tightening the metals markets.
The launch of platinum and palladium ETFs in Europe in 2007 had been a major contributor to the metals’ recent price increases and has helped generate “steady interest” from investors, said Merrill.
The brokerage predicted ETFs in the US would open up a “significant geographical market” for the metals and fuel price rises over the next two years.
