Base metals advance as winter grips China

US crude oil maintained an upward momentum on Wednesday, pushing above the $83- a-barrel mark, while base metals enjoyed strong gains and sugar prices extended their rally as markets continued a strong start to 2010. Crude oil prices were volatile following the latest US weekly inventories data that initially dragged Nymex February West Texas Intermediate down 92 cents to $80.85 a barrel. But WTI managed an impressive recovery later in the session and rallied $1.41 to $83.18. ICE February Brent rose $1.30 to $81.89 a barrel, rebounding from a low of $79.77. The price recovery was impressive as the US inventories data released yesterday were broadly negative. US crude stocks rose 1.3m barrels last week, confounding the consensus forecast for a drop of 500,000 barrels. The increase in petrol stocks, up 3.7m barrels last week, was well above the consensus forecast for a rise of 500,000 barrels. Nymex February RBOB unleaded gasoline fell 1.2 cents, or 0.6 per cent, to $2.1120 a gallon. Distillate stocks (including heating oil) fell 300,000 barrels, below the consensus forecast for a drop of 1.9m barrels. Traders expressed disappointment that cold winter weather had not led to a bigger drop in heating oil stocks. Nymex February heating oil lost 1.5 cents, or 0.7 per cent, to $2.1800 a gallon. Noting that refinery utilisation fell 0.4 percentage points to 79.9 per cent, Antoine Halff, analyst at Newedge Group, the US broker, said: “Optimism about the economy is more widespread among fund managers than among people who operate refineries.” Among the base metals, aluminium jumped 3.2 per cent to $2,375 a tonne on concerns that production in China could be disrupted by severe winter weather and resulting power shortages. Copper gained 2.7 per cent to $7,685 a tonne in spite of news that workers at Chuquicamata in Chile, the world’s second-largest mine, had accepted an improved wage offer from Codelco, the world’s largest copper producer. Codelco expects copper output to have reached record levels in 2009, above the peak of 1.73m tonnes in 2004. Arctic conditions in Mongolia have led to the closure of some lead and zinc mines, boosting prices. Zinc raced 5 per cent higher to $2,705 a tonne while lead jumped 5.4 per cent to $2,660 a tonne. Traders said short covering (closing bets on prices falling) was partially responsible for yesterday’s gains. Nickel added 1.8 per cent to $19,040 a tonne. White sugar prices rose 1.9 per cent to a record $736.7 a tonne while ICE March raw sugar gained 2.3 per cent to 28.27 cents a pound amid fresh concerns about supply problems in Brazil and mounting fears that the market will face a supply crunch. Gold rose 1.5 per cent to $1,135 a troy ounce, helped by dollar weakness after a disappointing improvement in US service sector activity for December. “I will be burned at the stake for being a heretic but the most dangerous asset must be gold,” said Alan Miller, a partner of SCM Private and formerly chief investment officer of New Star Asset Management. Mr Miller warned that the gold market has seen “huge speculative buying” that had created “an almost unprecedented price hike”. Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.