Oil prices rose above $60 a barrel for the first time in six months yesterday, boosted by signs of economic recovery, a weaker US dollar and growing investor appetite for riskier assets such as commodities.
The surge in oil prices, which have jumped 85 per cent from a five-year low of $32 a barrel in February, led a broader rise in a range of raw materials prices. Sugar rose to a three-year high, wheat reached its highest price since January, and tin hit a six-month peak.
The leading global commodity index, S&P GSCI, soared to its highest level since November and is up 20 per cent this year.
Paul Horsnell, head of commodities research at Barclays Capital in London, said signs that the global economy was improving meant commodities markets’ fears of an “absolute Armageddon were vanishing”.
Traders pointed to China, which yesterday revealed a large increase in raw materials imports, reflecting in part the economic recovery but also Beijing’s attempt to take advantage of lower prices to stockpile commodities. Iron ore and copper imports reached a record high last month, while crude oil imports hit their second-best month at the same time.
Other analysts said supply and demand fundamentals were still weak, even taking into account China’s swelling imports, and said speculative money was the main reason behind the rally.
“Recent price strength is not based on fundamentals but on financial flows,” said Mike Wittner, oil analyst at Société Générale in London.
Traders and bankers have reported a return of hedge fund money into the market and said big institutional investors such as pensions funds were making inquiries about commodities. But others said that money flows were not “overwhelming”.
The rise in commodities prices has been helped by the weakness of the US dollar, which yesterday hit its lowest level against other currencies since Barack Obama was inaugurated as US president in January. As most commodities are quoted in dollars, their prices usually rise when the US currency weakens.
Among food commodities, corn prices hit a four-month high .
Nymex June West Texas Intermediate oil, the US benchmark, rose to an intraday high of $60.08 a barrel, its highest since mid-November. It closed at $58.85.
Opec is to meet this month to discuss whether to make more production cuts.
The leading global commodity index, S&P GSCI, soared to its highest level since November and is up 20 per cent this year.
Paul Horsnell, head of commodities research at Barclays Capital in London, said signs that the global economy was improving meant commodities markets’ fears of an “absolute Armageddon were vanishing”.
Traders pointed to China, which yesterday revealed a large increase in raw materials imports, reflecting in part the economic recovery but also Beijing’s attempt to take advantage of lower prices to stockpile commodities. Iron ore and copper imports reached a record high last month, while crude oil imports hit their second-best month at the same time.
Other analysts said supply and demand fundamentals were still weak, even taking into account China’s swelling imports, and said speculative money was the main reason behind the rally.
“Recent price strength is not based on fundamentals but on financial flows,” said Mike Wittner, oil analyst at Société Générale in London.
Traders and bankers have reported a return of hedge fund money into the market and said big institutional investors such as pensions funds were making inquiries about commodities. But others said that money flows were not “overwhelming”.
The rise in commodities prices has been helped by the weakness of the US dollar, which yesterday hit its lowest level against other currencies since Barack Obama was inaugurated as US president in January. As most commodities are quoted in dollars, their prices usually rise when the US currency weakens.
Among food commodities, corn prices hit a four-month high .
Nymex June West Texas Intermediate oil, the US benchmark, rose to an intraday high of $60.08 a barrel, its highest since mid-November. It closed at $58.85.
Opec is to meet this month to discuss whether to make more production cuts.
Source: The Financial Times
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