Commodities markets summary

A summary of trading in key commodities markets overseas:

ENERGY

US oil prices have shot up above $US60 a barrel for the first time this year as reports of rising tensions in petroleum-producer Libya fuelled bullish momentum.

US benchmark West Texas Intermediate for delivery in June jumped $US1.47 to $US60.40 a barrel on the New York Mercantile Exchange on Tuesday.

European benchmark Brent oil for delivery in June advanced $US1.12 to $US67.52 a barrel in London.

"It's been strong all day," said John Kilduff, founding partner at Again Capital. "Sixty dollars was a psychological level that got eclipsed."

Kilduff and other analysts cited reports that protests in Libya had shut oil deliveries to a port in the eastern part of the North African country.

The Libya news "was the catalyst we basically needed," Kilduff said.

Kilduff said oil was also lifted by worries about stability in the broader Middle East due to ongoing strife in Yemen and news that US naval forces have begun accompanying US ships in the Strait of Hormuz after Iran seized a cargo vessel.

But Citi Futures analyst Tim Evans noted that oil traders have generally been in a more bullish mindset since US crude prices skidded below $US45 a barrel in mid-March.

"The petroleum markets are on the upswing, with headlines on a drop in Libyan crude oil production due to protests helping to justify the advance," Evans said in a note.

"It's worth noting, however, that to some extent it is the rally in price that is driving the search for bullish news rather than genuine risk of market tightness."

PRECIOUS METALS

Gold futures prices rose on Tuesday as the US dollar turned lower and global shares fell ahead of US non-farm payroll data later in the week.

Spot gold fell initially then firmed, and was up 0.4 per cent at $US1,192.80 an ounce. US gold futures for June delivery settled up $US6.40 an ounce at $US1,193.20.

"Gold was firm yesterday and is continuing the trend today, with dollar weakness helping," Deutsche Borse's MNI senior analyst Tony Walters said.

Gold pared gains as the US treasuries saw a wave of selling, traders said.

The US dollar turned lower against a basket of major currencies while the euro steadied against the dollar after falling 0.7 per cent.

"It bumped into $US1,200 and then when the dollar began to turn around a little bit, it kind of undermined gold," said Jim Steel, chief metals analyst for HSBC Securities in New York.

"The weakening of the euro weighed on gold prices."

Gold fell to a six-week low of $US1,170 on Friday after the Federal Reserve indicated it saw a slowdown in the US economy as transitory and did not rule out a rate rise this year.

"US data will continue to be very important - if it's good, we will eventually get lower gold prices," Natixis analyst Bernard Dahdah said.

However, with a US rate hike now likely in September rather than June, gold prices will probably remain in the current range for longer and will not drop as quickly as previously thought, Dahdah added.

Strong data could prompt the Fed to raise interest rates soon, a move investors would expect to dent demand for bullion, which does not pay interest.

Silver rose 0.8 per cent to $US16.58 an ounce after climbing to a four-week high on Monday. Platinum rose 0.2 per cent to $US1,142.49 an ounce, while palladium gained 1.5 per cent to $US792.05 an ounce, the highest level since March.

BASE METALS

Zinc hit its highest price in eight months on Tuesday and copper its loftiest since mid-December thanks to a combination of concern about supply shortfalls and optimism over the global economy.

All the metals on the London Metal Exchange (LME) attracted buying, which also pushed nickel to a six-week high, as the market reopened following a British public holiday on Monday.

"Commodities are bouncing back up, led by oil and iron ore. Base metals seem to be following the herd," said Richard Fu, director of Asian commodities trading for Societe Generale Newedge in London.

Three-month LME zinc jumped 2.6 per cent to an intraday peak of $US2,404.50 a tonne, the strongest since September last year. It failed to trade in closing open outcry activity and was last bid at $US2,400.

"The fundamentals in zinc are good," said Nic Brown, head of commodity research at Natixis in London.

"By the time we get to the end of year, and the effect of the closures of Lisheen and Century are starting to feed through, the fundamentals will look even stronger."

Investors are betting that the shutdown of big mines such as Lisheen in Ireland and Century in Australia will lead to a zinc deficit.

LME copper climbed 1.3 per cent to close at $US6,480 a tonne, the highest since mid-December last year.

The gains came after Glencore became the latest firm to report weaker production, posting a nine per cent drop in first-quarter copper output.

"The mine output picture is pretty poor in the first quarter. Copper miners are facing a lot of problems around the world," Brown said.

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