Last updated: May 12, 2009 11:05 pm

Oil hits $60 on global recovery hopes

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US crude oil prices hit the $60 a barrel level on Tuesday for the first time since November while trade data from China helped push base metals higher as commodity markets continued to gain support from hopes for an early recovery for the global economy.

Nymex June West Texas Intermediate hit a high of $60.08 a barrel on Tuesday before easing back to trade 35 cents higher at $58.85, supported by dollar weakness and initial gains for equity markets.

ICE June Brent rose 46 cents to $57.94 a barrel after reaching a high of $58.91.

Demand for oil in China appears to be strengthening with crude imports up 13.6 per cent year-on-year in April to 3.95m barrels, the first positive annual increase since October 2008.

The rise for oil prices came ahead of weekly US inventories data, due out on Wednesday. US crude stocks have reached their highest levels since 1990 and a further increase of 1.2m barrels was expected in Wednesday's’s data, according to a preliminary poll of analysts by Reuters.

US demand remains weak with stocks of petrol and distillates (including heating oil) seen rising 500,000 and 1.1m barrels respectively.

Cocoa prices continued to fall on concerns about the outlook for demand. ICE July cocoa lost 3.6 per cent to $2,380 a tonne while, in London, Liffe July cocoa dropped 4.4 per cent to £1,644 a tonne.

Gold extended its push above the $900 level, rising 0.8 per cent to $920 a troy ounce and moving between a low of $912.40 and a high of $922.80, helped by dollar weakness.

Base metals were mainly higher following data from China showing strong growth in investment spending and imports of copper and aluminium reaching record levels in April.

Copper rose 0.6 per cent to $4,595 a tonne while aluminium inched 0.1 per cent higher to $1,549.5 a tonne.

China’s imports of unwrought copper rose to 400,000 tonnes in April, up 63 per cent compared with the same month last year. Total aluminium imports tripled from March to reach 440,000 tonnes in April.

Earlier this week, China outlined plans to revitalise the country’s metals ­industry that included proposals to extend stockpiling of metals such as copper and aluminium.

Although China’s government was actively buying base metals earlier this year to support its domestic industry, traders note that stocks of aluminium, zinc and copper have been rising in Shanghai for several weeks.

Meanwhile, the spread between copper prices in Shanghai and London has narrowed substantially, closing the arbitrage opportunity which was drawing metal from London Metal Exchange warehouses into Asia.

Some dealers have been asking if the rally for base metals will be sustained.

“A ‘sell in May’ strategy has a real-economy underpinning when it comes to industrial metals,” said one trader. “There is growing evidence that the Shanghai market is losing some of its white heat ahead of what locals call the low season.”

Tin ended flat at $13,900 a tonne after earlier hitting a six-month high at $14,250 a tonne, amid concerns about production prospects in Indonesia where exports dropped 22 per cent year-on-year in April.

Koba Tin of Indonesia has warned May and June production will drop 20 per cent due to flooding.

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