Thursday December 23, 2010 08:44:19 AM GMT
Oil at 2-year high after sharp drop in US stockpiles
* Grains at multi-month peak; copper off from record
* Trading volumes stay thin as holidays get nearer
* Coming up: US jobless claims data on Thursday
By Barani Krishnan
NEW YORK, Dec 22 (Reuters) – Oil broke $90 a barrel, grains hit multi-month highs and metals retreated slightly as supply woes and other positive fundamentals kept investor sentiment in commodities intact on Wednesday despite thin trading volumes.
The 19-commodity Reuters-Jefferies CRB index extended Tuesday’s 26-month highs, even as combined volumes in energy, metals and agriculture were 60 percent below the 30-day average by 12:30 p.m. EST (1730 GMT).
Oil hit two-year highs. Copper fell marginally after record peaks in the previous session. Wheat rose almost 2 percent and corn hit 28-month highs to lead agricultural markets higher.
Aside from the sharp drop in U.S. crude stockpiles that boosted oil, investor sentiment in commodities was supported somewhat by higher global equity markets, and data showing the U.S. economy growing a touch higher than expected in the third quarter.
Even so, some of the price action in commodities this week has surprised some investors, traders and analysts expecting at most a little turbulence from book squaring activity ahead of the holiday season, which begins with Friday’s pre-Christmas holiday.
Volumes are expected to be thinner on Thursday, even as investors face a flurry of economic data that includes weekly U.S. jobless claims.
“Call it the Santa Claus rally, the end of the year rally or whatever you want, but you’re definitely seeing markets being bid higher, though on very light volume,” said Adam Sarhan at New York-based financial advisory Sarhan Capital.
“The bulls are definitely in control and until we see some technical or structural damage setting in, we have to err on the side of being positive.”
The CRB index has had an eventful year, poised to finish up 15 percent, after dropping 10 percent in the first six months and rising 25 percent in the second half of the year.
Besides copper, cotton and gold are other markets that are about 3 percent or less away from testing new record highs. Sugar is near 30-year peaks while arabica coffee hovers around 13-1/2 year tops.
Although global recovery from the financial crisis had not reached desired levels, economists have broadly raised expectations for 2011, with a Reuters poll showing a relatively bullish mood compared to the start of this year.
“With two days to go until Christmas Eve risk markets have ignited the afterburner, reinforcing one more time the all-pervasive mantra throughout 2010, “What crisis?”, said a research note from Wall Street bank JPMorgan.
Crude oil’s benchmark front-month contract in New York rose to $90.80, its highest since Oct. 2008, after U.S. government data showed a 5.33 million barrel decline in crude stocks.
Oil prices are up 13 percent year-to-date, with more than two-thirds of the gains coming in the last two months after better supply-demand conditions and positive sentiment related to a $600 billion U.S. economic stimulus package.
In copper, the benchmark three-month futures contract in London closed down $15 at $9,350 a tonne, after reaching an all-time high $9,392 on Tuesday. New York’s most-actively traded copper contract, March, settled a touch lower at $4.2750 a lb.
Copper prices have risen 27 percent on the year, falling in the first six months before surging as the dollar weakened in the third quarter and the U.S. Federal Reserve announced its multi-billion dollar economic stimulus.
Analysts said although current economic readings were not entirely bullish for copper, the metal used in construction and power was seeing strong support from a steady drop in stockpiles this year and export problems faced in the near-term by No. 3 copper miner Collahuasi.
U.S. corn futures rose for a sixth straight session, touching 28-month highs above $6.05 a bushel.
Wheat jumped 2 percent to a 4-1/2 month high above $7.85 a bushel on technical buying. Soybeans hit a 5-1/2 week peak above $13.30 a bushel on strong Chinese demand prospects and concerns that bad weather would cut Argentine crops.
Thursday December 23, 2010 08:44:19 AM GMT