AB: METALS Copper rises on oil gains, steady dollar
* Oil firm ahead of weekly stocks data, supports metals
* Aluminium reverses from rally in previous session
SHANGHAI, June 9 - Copper prices rose on Tuesday, on firm oil prices and a steady dollar, while London aluminium pulled back from the highest level this year hit in the previous session.
Oil rose above $69 a barrel, snapping two days of falls ahead of weekly stocks data forecast to show a fall in U.S. crude inventories.
The dollar was steady against a basket of currencies but stayed below a two-week high last week after stronger-than-expected U.S. jobs data stoked expectations for a Federal Reserve rate rise later this year.
Metal market fundamentals are not showing signs of dramatic change, so investors are more focused on movements of the dollar and oil prices, analysts and traders said.
"This week it's the dollar. There's no news out, there's nothing happening, I think the dollar is exerting a lot of influence. The dollar will weaken again this week, and a lot of commodities will move higher," said Edward Meir, an analyst at MF Global, pointing out that aluminium could be the exception.
Shanghai's benchmark third month copper futures contract rose 1.1 percent to 40,870 yuan a tonne from a day earlier, and the most-active contract for September delivery rose 1.2 percent to 40,980 yuan a tonne.
Shanghai's front-month and third-month contracts have been in contango for five days, at around 220 yuan. It is the longest sustained contango since April 2008, normally a sign that the market is well supplied.
China's copper imports in May probably fell from April's all-time high, as end-user demand waned,traders and analysts said.
"The market is still quite bullish. Copper is likely to trade on high levels this week, seeking to break through the resistance at $5,400-$5,500, but it probably will not happen within the week," said Wang Zhouyi, an analyst with Shanghai CIFCO Futures.
The world's top oil forecasters are likely to present a more bullish outlook in their monthly market reports this week, suggesting oil demand could bottom out and inventories start falling in the next few months.
Copper for three-month delivery on the London Metal Exchange rose $50 to $5,030 a tonne by 0701 GMT.
LME copper inventories fell 2,125 tonnes to 297,850 tonnes on Thursday. Cancelled warrants -- material tagged for delivery -- stood at 32,475 tonnes, or about 11 percent of the total tonnage.
London's three-month aluminium contract shed $13 or 0.8 percent to $1,609 a tonne, retreating from gains in the previous session when the metal hit $1,645, its highest since Jan. 7.
The rally was partly fueled by a jump in cancelled warrants, hinting at stronger demand, despite aluminium inventories hitting yet another record high of nearly 4.3 million tonnes.
Cancelled warrants rose about a third to 109,700 tonnes from 81,375 tonnes on Monday. But some wondered whether it could represent any real improvement in demand for the metal, used in transport and packaging.
"Out of 4.3 million tonnes, a few hundred thousand tonnes is a drop in the bucket. I don't see much in terms of the fundamentals," said Meir of MF Global.
Meir added the current rally is not too different from the ones in late April and early May, both of which ended up in heavy sell-off.
"Unless LME inventories started falling fast, aluminium prices would rise steadily. Otherwise, aluminium prices have gone too far, considering the economic situation we are facing right now," said a Beijing-based trader. Base metals prices at 0701 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 5030.00 50.00 +1.00 3060.00 64.38 SHFE Cu* 40870.00 460.00 +1.14 23840.00 71.43 LME Alum 1609.00 -13.00 -0.80 1535.00 4.82 SHFE Alum* 13420.00 125.00 +0.94 11540.00 16.29 COMEX Cu** 224.70 0.00 +0.00 139.50 61.08 LME Zinc 1566.00 21.00 +1.36 1208.00 29.64 SHFE Zinc 13415.00 120.00 +0.90 10120.00 32.56 LME Nickel 14375.00 75.00 +0.52 11700.00 22.86 LME Lead 1673.00 4.00 +0.24 999.00 67.47 LME Tin 14950.00 50.00 +0.34 10700.00 39.72 LME/Shanghai arb^ -647 Dollar/yuan 6.8348 \ 6.8351 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
